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Kimberly Clark Breaks Triangle Support

05/15/08 10:58:46 AM
by Arthur Hill

After consolidating for months, Kimberly Clark finally made up its mind with a support break that signals a continuation of the long-term downtrend.

Security:   KMB
Position:   Sell

Figure 1 shows Kimberly Clark (KMB) with a large triangle that extends from mid-January to early May. This represents one big consolidation that formed after the December–January decline. Even though the pattern is technically neutral, the prior decline gives it a bearish bias. The stock broke triangle support with a sharp decline last week, and this signals a continuation of the Deember–-January decline.

FIGURE 1: KMB, DAILY. Note the large triangle that extends from mid-January to early May, representing one big consolidation that formed after the December–January decline.
Graphic provided by: TeleChart2007.
 
The stock shows relative weakness and that on-balance volume (OBV) is weak. The bottom indicator (red line) shows the price relative, which compares the performance of KMB to the Standard & Poor's 500 exchange traded fund (ETF) (SPY). KMB shows relative weakness when the red line moves lower. The price relative broke support in early April and hit a new low in early May. OBV shows similar weakness. The indicator never recovered after the December–January decline and drifted lower the last few months. Distribution remained in the stock even after this sharp decline.

FIGURE 2: KMB, WEEKLY. See the large consolidation that extends from late 2005 to early 2006.
Graphic provided by: TeleChart2007.
 
With a fresh break down on the daily chart, I will turn to the weekly chart, Figure 2, to identify the next support level. There is a large consolidation zone that extends from late 2005 to early 2006. The lows from this zone mark support around 56, and this is the downside target. In addition, it looks like the triangle breakdown signals the start of the third decline. The numbers 1 and 2 mark the lows for these declines. Another leg down would be expected to forge a lower low.



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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