MRK – Merck & Company – The global research-driven pharmaceutical company's Point & Figure chart shows the breaking of the main bearish resistance line at $27.75 switching the trend from bearish to bullish. Since the lower tops pattern set in December 07 and January 08 at $61.50 and $61.00 share prices weakened sharply breaking the bullish support line at $57.25 confirmed by the double bottom breakout at $56.50 and reversing the trend mode from bullish to bearish. Two “Long Tail Down” patterns took prices at $52.50 first and then at 42.50 developing a long progressive downtrend defined by a lower highs and lower lows pattern until support at $23.00 contained the bleeding. The movement reacted to the upside reaching $31.50 level but bouncing off the main bearish resistance line. After pulling back to $27.00 the new attempt successfully penetrated on the upside the bearish trend line at $30.50 but turned out to be a bull trap. Prices resumed the contraction and a sell off evolved taking quotations to set the lows at $20.25 early March 09. The “Low Pole” pattern that developed from the washed out condition projected an upside target at $42.00. The recent triple top breakout at $27.75 coincided with the violation of the main bearish resistance line which also reversed the trend to bullish. Prices are now pulling back finding support along the intermediate bullish line. Latest actions have been exhibiting very clear indications that the weight of the evidence has shifted to the long side. Relative Strength vs the market is pausing in the short term but still positive in the long run. Long positions should be taken with first target at $32.50 and subsequently at $42.00. On the downside lighten progressively at the penetration of the intermediate bullish support line and afterwards at $25.50. Close all long positions at the violation of the main bullish support line.
KSS – Kohl's Corporation – Shares of the family-focused, value-oriented, specialty department store closed the week stable at $43.14 maintaining its upward bias. Share prices set a top back in April 07 at $80.00 before trading sideways with a warning pattern of higher highs and lower lows. Breakout of the main bullish support line at $73.00 in June 07 turned the trend to bearish causing a progressive weakening until a temporary support was found at $52.50. The reaction to $64.00 proved to be powerless and downtrend resumed taking prices to reach a more solid base at $37.50. A nine-months long sideways trading started with base at $37.00 and resistance set at $51.00. A promising upside breakthrough of the resistance at $51.00 turned out to be a “Bull Trap”. Prices did not have enough steam to cross the threshold at $56.50 which after acting as support during downtrend became afterwards a solid resistance. Prices bounced off and declined sharply setting also a downside target at $27.50 which was reached and exceeded in November 07 when the lows were touched at $24.50. The uptrend resumed with a strong reaction which encountered solid resistance at $39.50. After giving back some ground to $32.50 the movement revamped and finally violated the main bearish resistance line at $35.50. A piercing up-leg broke through resistance with the triple top buy signal at $40.00 adding more weight to the bullish evidence. Prices are now raising along the intermediate trend line preserving an “higher highs and higher lows” pattern. Relative Strength vs the market is positive setting it as an outperformer. Long positions should be taken with medium term target set at $59.00. On the downtrend lighten progressively at $41.00 and $39.50. Close all long positions at penetration of the main bullish support line.
SXCI – SXC Health Solutions Corporation – Provider of a broad range of pharmacy spend management solutions, SXC Health Solutions Corporation has seen its shares fall 3.05% to $21.28 last Friday but still keeping above the short term bullish support line preserving its bullish condition. From the double top at $31.25 in July 07 the downtrend rolled out giving a warning signal of impending turn around with the breaking of the intermediate support line at $28.00. The “Long Tail down” pattern violating the main bullish support line at $22.50 officially reversed the trend from bullish to bearish indicating that all long positions should be liquidated. The downtrend found early support with the double bottom at $11.50 before the final sell off which took prices to reach the historical lows at $10.00 in February 08. After trading sideways for few months the breakthrough of the main bearish resistance line at $14.00 in November 08 gave the turnaround signal. Since then share prices raised nicely along the main bullish support line with a pattern of higher highs and higher lows. A temporary penetration of the bullish trend line on the downside followed by a sharp reaction designed a “Low Pole” pattern which projected an upside target at $30.50. The uptrend proved to be solid lending itself to add more to the long side. Relative strength vs the market has weakened in the short term but still positive for the long shot. Long positions should be maintained with short term targets set at $23.25/$25.75 and in the medium term heading to $30.50. On the downside lighten progressively at $20.25 and $18.75. Close all long positions at penetration of the main bullish support line.
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.