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VOLATILITY


Comerica Under Bearish Pressure

09/24/10 11:59:06 AM
by Chaitali Mohile

It appears that bulls are under pressure in Comerica.

Security:   CMA
Position:   Sell

The past few months were crucial for Comerica Inc. (CMA). The stock is undergoing a bearish rally. The lower lows and highs show weakness in CMA. The lower highs are marked by a descending trendline in Figure 1. The pullback rally from $33 halted near the trendline resistance with jittery support of the 50-day and the 200-day moving averages (MA). CMA consolidated at this support-resistance level. The consolidation after an advance rally is considered as a bullish continuation formation. However, the consolidation of CMA was highly volatile, unable to sustain the MA supports. The stock is likely to break down instead of resuming its bullish rally by moving upward.

FIGURE 1: CMA, DAILY
Graphic provided by: StockCharts.com.
 
Recently, CMA formed a bearish engulfing candlestick pattern during the consolidation. The relative strength index (RSI) (14) is unable to establish support above the 50 levels. The stock has witnessed an unstable trend due to the fluctuations in buying and selling pressures. The likely reason for the volatile descending rally would be the equal force from the bulls as well as bears. Eventually, the buying pressure by the bulls diminished as the stock formed lower highs. In addition, the bearish breakout from the consolidation diluted the possibility of a bullish move in the near future.

Short-term traders can trigger fresh short-selling positions at the current price with a potential target of $33.

FIGURE 2: CMA, WEEKLY
Graphic provided by: StockCharts.com.
 
CMA began its bullish run in March 2009, recovering all its previous losses. However, the rally toward the north side of the price chart in Figure 2 was shaky. During the upside move, price frequently retraced to test previous support, triggering a bearish force in the rally. Gradually, the stock breached the 200-day MA resistance and tried to establish fresh support. However, the overheated uptrend as indicated by the overbought RSI (14) gave way to weakness in price action and the stock plunged below its 200-day MA support.

Thereafter, CMA moved in a descending channel with robust bearish force. The large red candles in the marked channel in Figure 2 reflect the bearish strength.

The RSI (14) is tangled with the center line, indicating uncertainty and weakness to climb in the bullish zone. In addition, the overheated ADX (14) has tumbled below the 20 levels, reflecting the weak trend.


CMA lacks the bullish support to begin a fresh rally. The selling pressure is likely to further weaken the price by moving below the two MAs' support.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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