CSCO - Cisco Systems, Inc. – Shares of the leading supplier of networking equipment and network management for the internet switched to bullish mode after breaking key resistance level at $18.00. The “High Pole” pattern generated in November 07 right after the peak at $34.20 developed into a piercing “Long Tail Down” breaking the bullish support line at $30.50 and formally reversing the outlook from bullish to bearish. The turnaround movement confirmed by the double bottom breakout at $30.00 projected also a downside target at $16.20 which at that time seemed unrealistic but 16 months later became so real. The first leg of downtrend reached $21.80 in February 08 where prices gained back some ground pulling back to $27.70 before the downtrend resumed finding lately another support area at $20.60. The new reaction bounced off the $25.20 resistance level although a brief break out of the main trend line at $25.00 created a vain expectation. March 09 final sell off to $13.70 turned out to be a “Low Pole” pattern recovering swiftly from a washed out situation with a sharp up thrust to $16.90 which also projected an upside target at $23.30. The latest trading sessions developed a significant breakout of a multiple top pattern at $18.00 followed by penetration of main bearish resistance line at $18.30 which reversed the trend to bullish. Right after the breaking prices pulled back finding support close the intermediate support line at 16.60 and are presently resuming the uptrend. The Relative Strength Vs the market is negative in the short term but still detaining a positive outlook for the long shot. The technical perspective suggests to go long opening new positions at the double top breakout at $18.70 with initial target in the range of $23.30/$23.60. On the downside lighten progressively at the double bottom breakout at $16.50 and at penetration of the intermediate trend line respectively. Close all positions at penetration of the main bullish resistance line with possible contraction down to $12.60.
JNJ - JOHNSON & JOHNSON – Provider of scientifically sound, high quality products and services to help heal, cure disease and improve the quality of life, Johnson & Johnson's shares failed to penetrate the main bearish resistance line putting further downward pressure. Prices have been exhibiting very clear indications of a bearish perspective since September 08's double top at $72.75 which marked the turnaround point. The penetration of the main support line at $68.75 confirmed by the double bottom breakout at $68.50 sealed the new downtrend. The “Long Tail Down” pattern that in 2 weeks led prices to touch $51.75 demonstrated clearly the structural weakness. After almost 6 months of sideways trading described by lower tops and higher bottoms prices initiated a new shrinking phase developing another “Long Tail Down” pattern to reach the actual lows at $46.25 at the beginning of March this year. The oversold condition generated a nice recovery from the lows featuring a triple top breakout at $51.75 followed last week by a multiple top breakout at $53.75 which reversing swiftly to the downside and failing to confirm the main resistance line breakout turned out being a “Bull Trap” pattern. Relative Strength is negative meaning that the overall market should perform better than JNJ. Lighten at triple bottom breakout at $49.25 and close all long positions at double bottom breakout at $46.00 with likely contraction to $40.00. On the upside open long position at penetration of the main resistance line with target at $62.00.
SEP – SPECTRA ENERGY PARTNERS LP – Owner and operator of natural gas transportation and storage assets, the growth oriented partnership's shares reversed the main trend to the upside projecting ambitious targets. Since the peak of June 2007 at $30.75 prices declined sharply with a “Long Tail Down” pattern reaching $25.25. The sideways trading that followed extended for over 12 months oscillating in the range $21.50 to $25.00. During the lateral movement a “High Pole” pattern developed at $25.00 between end of January and early February 08 projecting a downside target at $14.50 which was reached with an amazing accuracy 9 months later in September 08 establishing also the all time lows. The accomplishment of 2 “Low Pole” patterns at $14.50 and $16.00 marked the turning point in the chart development. A strong recovery brought along a trend reversal after penetrating the main resistance line at $20.25 confirmed by the breaking of the key resistance level generated with the triple top breakout at $21.00. Relative strength is negative in the short term but still maintaining a positive outlook for the long term. Long positions should be taken with first target at $24.75 and then at $28.00 and $31.00. On the downside lighten at double bottom breakout at $19.75. Close all long position at penetration of the main support line with possible contraction down to $16.00.
Fabio Verdelli (CMT) is equity technical analyst at MV Portfolio Advisors. He has analyzed commodities and financial markets using technical analysis since 1998 and implemented technical analysis to develop trade ideas and assess risk. He is an expert on Point & Figure charting method and is currently publishing analysis on “Trend-online” financial website and Yahoo Finance Italy.Verdelli is a member of the Market Technician Association (MTA) and a member of the nominating committee within the MTA
MV Portfolio Advisors offers capital investment and risk management consulting. The firm provides equity research reports based on technical analysis featuring investment opportunities arising in the marketplace to help portfolio managers making timely trades.