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MOVING AVERAGES


ACIW Loses Momentum At Resistance

12/05/08 08:28:50 AM
by Arthur Hill

After bouncing back to broken support, ACI Worldwide formed a bearish candlestick pattern and the MACD turned lower. This all suggests that resistance will hold and that the stock is headed lower.

Security:   ACIW
Position:   Sell

Figure 1 shows ACI Worldwide (ACIW) with the 200-day moving average. Note that the stock is below the 200-day and the moving average is falling. A clear downtrend is under way, and this favors bearish setups over bullish ones.

FIGURE 1: ACIW, DAILY. Note that the stock is below the 200-day moving average and the moving average is falling.
Graphic provided by: TeleChart2007.
 
ACIW broke a support zone with a sharp decline and this zone turns into resistance. Even though the stock spiked through this support zone in early August, I think this was an overshoot and I continued to base support on the May–July lows. A basic tenet of technical analysis stipulates that broken support turns into resistance. The stock met resistance here in late November and again in early December.

Figure 2 affirms resistance with a key retracement and bearish candlestick pattern. The advance back above 15 retraced 50% of the prior decline. This is normal for a corrective advance in a bigger downtrend. ACIW formed a harami over the last two days, and this candlestick pattern is potentially bearish. This pattern represents indecision after an advance and can foreshadow a reversal. Confirmation is required and a move below the October trendline would be bearish.

FIGURE 2: ACIW, DAILY. Here, a key retracement and a bearish candlestick pattern are both affirmed.
Graphic provided by: TeleChart2007.
 
The moving average convergence/divergence (MACD) already rolled over and momentum is moving lower. The MACD advanced with the stock from late October until mid-November. The advance started losing steam in the second half of November and the MACD moved below its signal line. This is an early bearish signal, and confirmation would come with a move into negative territory.



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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