Monday, July 25, 2011

Technical Analysis Quiz

Here is Hewlett-Packard.  Love the printers, love their e-commerce site where I buy ink. But the stock? Nasty, nasty, nasty.  Or is it?
What are the five technical features outlined on this chart? Winner gets a hearty "atta boy" or "atta girl" depending on your personal situation.


Will said...

A: appears to be a double top that was eventually taken out, previous resistance tends to be future support, which is relevant in the next point...

B: A huge reversal, significant because of a bearish momentum divergence, it goes on unfilled, breaks below the 50 DMA (common chart watcher support), and the support level established at point A.

C: The 50 DMA, a common chart watcher support/resistance, turns lower; significant here because once HPQ consolidated and tested this resistance, it quickly gapped down again.

D: Since HPQ touched the 50 DMA and again turned lower this appears to be a significant pivot, we can then draw a trend line connecting the high and this important pivot level.

E: Similar to point C, HPQ appears to be consolidating again. This time however when touching the 50 DMA and trend line resistance, HPQ has for now broken above both.

F: Adding to a possible bullish case, despite a lower low in price, a bullish momentum divergence has been building despite a lower low at point E.


m said...

Adding to Tier1 the formation of the Invert Head & Shoulder Reversal pattern, as soon as a breakout of the neckline occurs we would confirm the pattern and reversing the whole downtrend.

In addition I would guess the last gap occurred can be an Exhaustion Gap but would like to see the volumes as we need high volumes to consider it as an Exhaustion Gap that would indicate the end of the downtrend.

Happy Charting


Michael Kahn said...

A - would not call it a double top - just resistance. The center of the "M" pattern was never taken out.

B - part of the same resistance but it comes from the bottom of the gap

C - 50-day average, as mentioned

D - trendline, as mentioned

E - inverted head-and-shoulders. Better since the high between the head and right shoulder is part of the trendline.

F - bullish RSI divergence, as mentioned

I don't consider the gap heading into the H/S an exhaustion gap. Seems more like a measuring gap since the decline from there was on par with the previous measuring gap at B.