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MOVING AVERAGES


ANN Hits A Wall

05/09/08 09:04:51 AM
by Arthur Hill

Ann Taylor Stores bounced over the last few weeks, but weak volume and nearby resistance suggest that this bounce will end sooner rather than later.

Security:   ANN
Position:   Sell

Figure 1 shows Ann Taylor Stores (ANN) in a clear downtrend. The stock forged a series of lower lows and lower highs over the last two years. This is the basic definition of a downtrend. Until ANN can take out one of these highs or forge a higher low, the downtrend is in force until proven otherwise. The falling 200-day marks resistance around 27, and this is confirmed by broken support (gray line).

FIGURE 1: ANN, WEEKLY. Ann Taylor is in a clear downtrend in this chart, forging a series of lower lows and lower highs over the last two years.
Graphic provided by: TeleChart2007.
 
The red line shows the 40-week simple moving average, which is equivalent to the 200-day SMA (40 times 5 equals 200). The stock remains below this key moving average, and the moving average is moving lower. The blue line is a 10-period simple moving average (SMA) of the 40-week SMA. As long as the red line is below the blue line, the moving average is falling, and this confirms the long-term downtrend.

Figure 2 shows daily candlesticks and the stock failed at resistance over the last few weeks. ANN hit resistance around 26.5 twice in February. There was a surge to resistance in mid-April, but the stock stalled just below resistance for four to five days. After this stall, ANN moved lower the last five days, and the bigger downtrend looks set to continue after the failure.

FIGURE 2: ANN, DAILY. The stock failed at resistance over the last few weeks, a glance at this chart tells us.
Graphic provided by: TeleChart2007.
 
The blue line shows on-balance volume (OBV) over the last few months. The stock bottomed in March and challenged resistance in April. However, OBV continued lower and hit a new low in April. There was a bounce in the second half of April, but OBV is severely lagging the stock. Upside volume is not keeping up with downside volume, and this shows weakness.



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
Company: TDTrader.com
Address: Willem Geetsstraat 17
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E-mail address: arthurh@tdtrader.com

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Date: 05/13/08Rank: 3Comment: 
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