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ASCENDING TRIANGLES


A High-Volume Breakout For Xilinx

03/12/08 08:56:35 AM
by Arthur Hill

Xilinx broke through ascending triangle resistance with a gap on good volume to signal a continuation of the January surge.

Security:   XLNX
Position:   Accumulate

Figure 1 shows Xilinx (XLNX) with the ascending triangle formation. This is a bullish continuation pattern that forms after an advance. After surging in the second half of January, the stock consolidated with the ascending triangle in February and early March. There was resistance at 23.40 from the February highs. Despite this resistance, the stock forged higher lows in February as buyers stepped in to support the stock.

FIGURE 1: XLNX, DAILY. Note the ascending triangle formation here. After surging in the second half of January, the stock consolidated with the ascending triangle in February and early March.
Graphic provided by: TeleChart2007.
 
The resistance breakout confirms the pattern and targets a move to around 27. The length of the pattern is added to the breakout point for a target. I calculate around 3.5 for the length and the breakout is at 23.4 (23.4 + 3.5 = 26.9). The late February lows become key support and a move below this level would negate the pattern (breakout).

FIGURE 2: XLNX, DAILY. The stock Xilinx is shown here with the price relative. This compares the stock performance of the stock with the S&P 500.
Graphic provided by: TeleChart2007.
 
Good upside volume and relative strength validate the pattern. The stock moved higher with good volume in four of the last six sessions. Volume on the breakout day was above average, and this shows strong buying interest. Figure 2 shows XLNX with the price relative. This compares the performance of the stock with the Standard & Poor's 500. Note that the price relative broke out ahead of the stock and surged to its autumn highs. This shows that XLNX is leading the market and further validates the breakout.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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Date: 03/12/08Rank: 5Comment: 
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