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Itron Forms Bullish Consolidation

04/03/08 09:20:05 AM
by Arthur Hill

Itron remains in a long-term uptrend, and the recent consolidation looks like a resting period that will give way to an upside breakout.

Security:   ITRI
Position:   Accumulate

Figure 1, the long-term chart, shows Itron (ITRI) in a clear uptrend. Despite a big decline in November, the 50-day simple moving average (SMA) remains above the 200-day SMA. The 200-day moving average is also rising and the long-term trend should be considered up as long as the 50-day holds above the 200-day. These moving averages smooth the prices and reduce the volatility.

FIGURE 1: ITRI, DAILY. Itron appears to be in a clear uptrend.
Graphic provided by: TeleChart2007.
 
After the November decline, the stock moved into a volatile trading range with support in the low 70s and resistance around 100. There were two bounces off support and two surges to resistance. A break above 100 would open the door for a challenge to the October high.

Figure 2 homes in on the last three months of trading. ITRI surged off support with a gap and then consolidated in March with a triangle. This consolidation pattern is neutral and depends on a break for a directional bias. With a surge above the triangle trendline over the last two days, the bias is now bullish again and the next resistance area is around 100.

FIGURE 2: ITRI, DAILY. During the last three months of trading, ITRI surged off support with a gap.
Graphic provided by: TeleChart2007.
 
Momentum and volume are also turning up. The moving average convergence/divergence (MACD) declined all the way to the zero line in late March and then firmed. This momentum indicator turned up with the stock surge and moved above its signal line. The MACD is both in positive territory and above its signal line, which is a bullish combination. And finally, the stock moved above triangle resistance with above-average volume. This further validates the breakout. Look for a move below the late March lows to negate this 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.

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Date: 04/04/08Rank: 4Comment: 
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