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CME Holds Its Breakout

10/07/08 09:02:06 AM
by Arthur Hill

The CME Group bucked the market in September with a breakout and continued relative strength points to further gains.

Security:   CME
Position:   Accumulate

CME Group (CME) operates the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT). While the markets go haywire, CME acts as the messenger by processing the orders. This makes the group somewhat immune to volatility and uncertainty. CME benefits as long as traders keep trading.

FIGURE 1: CME, DAILY. Here, CME is breaking above resistance with a gap up in mid-September.
Graphic provided by: TeleChart2007.
The first candlestick chart (Figure 1) shows CME breaking above resistance with a gap up in mid-September. Broken resistance turned into support and the stock held the breakout over the last few weeks. Technically, there were two dips below support, but the stock recovered immediately and held support for the most part. With the breakout largely holding, I would expect further strength in the coming weeks.

Figure 2 shows a long-term perspective for CME with a few indicators. The stock bottomed in July and pretty much consolidated in August and September. This consolidation formed a base from which to launch an advance. The next target is around 500 and stems from broken support and the March–April highs (red line).

FIGURE 2: CME, DAILY. This stock bottomed in July and consolidated in August and September, producing a consolidation from which to launch an advance.
Graphic provided by: TeleChart2007.
Volume and relative strength favor further gains. Upside volume started increasing in the second half of August and into September. Note how on-balance volume (OBV) surged from late July to mid-September. This move reflects strong volume on up days and further reinforces strength. The bottom indicator window shows the relative strength comparative. This indicator also broke resistance in September and moved higher in October. CME is leading the broader market (SPY) and leadership is important for portfolio managers.

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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