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CANDLESTICK CHARTING


A Bearish Candlestick Reversal For Intel

05/14/08 01:41:37 PM
by Arthur Hill

Intel rallied to a key retracement area and then formed a bearish candlestick reversal pattern. This points to resistance and possibly even a reversal of the current uptrend.

Security:   INTC
Position:   Hold

Figure 1 shows Intel (INTC) with a sharp decline in December 2007–January 2008 and then an advance from mid-January to the present. Broken support and the gap turned into resistance, and the stock rallied back to this area. In addition, the advance retraced 50–62% of the prior decline. This retracement zone represents the upper limits for a retracement rally and also acts as resistance.

FIGURE 1: INTC, DAILY. Note the sharp decline in December 2007 to January 2008, and then the advance from mid-January to the present.
Graphic provided by: TeleChart2007.
 
The bottom indicator window shows the stochastic oscillator. The indicator became overbought in March, April, and now May. In fact, the indicator has been overbought since mid-April. Momentum remains strong as long as the stochastic oscillator remains overbought (above 80). A move below 80 would end this overbought period and could foreshadow weakness in the stock.

Figure 2 shows a rising price channel from mid-January. The middle trendline is a linear regression from the mid-January low to the early May high. The gray trendlines are parallel and capture the channel. The lower trendline has been touched three times and defines the current uptrend. Look for a break below this trendline to reverse the medium-term uptrend.

FIGURE 2: INTC, DAILY. Here's a rising price channel from mid-January.
Graphic provided by: TeleChart2007.
 
In the meantime, the stock formed a dark cloud pattern on May 6–7. After a white candlestick, the stock opened above the prior close and closes below the midpoint of the prior white candlestick. This black candlestick reflects a failed rally attempt and can foreshadow a short-term reversal. A move below the May 6th low would confirm this bearish candlestick reversal pattern and target weakness toward the lower channel trendline.



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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