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Level 3 Communications Has Turned the Corner

05/21/02 03:09:56 PM
by Andrew Hetherington

In these volatile times it is difficult to find a long position that makes you feel comfortable.

Security:   LVLT
Position:   N/A

Graphic provided by: SuperCharts.
This chart for Level 3 Communications (LVLT) gives every reason to take a long position. LVLT has formed a larger 8-month symmetrical triangle with a smaller 3-month symmetrical triangle within it. The volume on these patterns is good, slowly diminishing throughout the creation of the pattern. The third fan line held strong if you look at the dotted line. This line gave a good entry point in the $3.60 area if you were anticipating a breakout at $4.50. Taking a long position on this chart had limited downside along this line. You would place a stop-loss underneath the line for protection.

The volume began increasing slightly after touching the third fan line. This gives the indication of strength. In addition, this bottom reversal triangle has something to reverse since it has come down from lofty heights. This is the style of reversal pattern I prefer when trading long. I look for large drops with large reversal patterns at the bottom.

The time for entry has passed, but there will be another opportunity to enter a long position on the anticipated throwback. I am prognosticating the throwback to be in the $4.60 to $4.75 area. There may not be a throwback, but if there were I would take a position in the cradle of the triangle.

This will likely be a very good medium- to long-term holding. Naturally, if the performance line is breached along the bottoms -- I've made reference to this in other articles -- it will be a safe time to lock in profits.

Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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Date: 05/21/02Rank: 5Comment: 
Date: 05/23/02Rank: 5Comment: Excellent Article. I really like articles where they talk about classic chart patterns.
Date: 06/04/02Rank: 1Comment: 

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