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Gymboree Fails At Resistance

09/23/08 08:42:46 AM
by Arthur Hill

Gymboree failed a major resistance, and a momentum breakdown points to lower prices over the next few weeks.

Security:   GYMB
Position:   Sell

Figure 1 focuses on resistance and the recent failures. Gymboree (GYMB) broke support with a sharp decline in May, June, and July. Broken support levels from the May and June lows turned into a resistance zone (red rectangle). The stock met resistance at this zone in July, August, and September. With a sharp decline over the last two days, GYMB failed to break through resistance and the bulls look weak.

FIGURE 1: GYMB, DAILY. This stock broke support with a sharp decline in May, June, and July.
Graphic provided by: TeleChart2007.
In addition to the resistance zone, GYMB is having trouble getting back above the 50-day and 200-day moving averages. The stock broke the 50-day in May and the 200-day in late June. These moving averages then offered resistance as the stock was unable to hold above them in August and September. The 50-day (green) is currently below the 200-day (red) and this is also negative.

Figure 2 focuses on the price pattern and momentum. A rising wedge formed from July to September. After breaking support with the May–July decline, this wedge represents a weak rally attempt. Most recently, GYMB failed at resistance at least four times in the last five weeks. The stock is on the verge of breaking trendline support, and this could be the straw that breaks the bull's back.

FIGURE 2: GYMB, DAILY. A rising wedge formed from July to September.
Graphic provided by: TeleChart2007.
The bottom indicator window shows a relative strength index (RSI). Note that RSI declined from May to July as the stock moved lower (red line). The RSI breakout in early July coincided with the rising wedge. The RSI recently broke the July trendline and moved below 50. Momentum now favors the bears, and this increases the odds of further weakness in the stock.

Arthur Hill

Arthur Hill is currently editor of, 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 and the main contributor to the ChartSchool.

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