Instock;
What we have here is what W. J. O'niell calls a symettrical triangle.
Others call it a pennant. Whatever you call it this one's beautiful.
Now, the prevailing literature tends to agree that such a formation
usually breaks to the upside and signals a buying opportunity when it
does. As for being overbought, it would seem that it is but you never
know how overbought something can get. Especially when there is no
news on it.
The classic Relative Strength top shows decreasing RS
as the stock keeps going up. First, a RS top on a nice price move,
then RS backs off and as the stock moves even higher, the RS moves up
but not as high as the first move. The third time up, the RS goes
higher than the second time but still not as high as the first. That
is usually the top. (but sometimes a fourth move happens with the price
to a new high but the RS still not to a new high.)
OK now that we have that out of the way, on 2/25 ONPT's 3 day RSI made
a new high.
That's the reference point going into that last move. Since 2/25 ONPT
made the next higher close on, I think, 3/23 but the RS move was lower
than on the 2/25 move. Then on 4/1 ONPT moved up again. On this move
the RSI went higher than 3/23 but not as high as 2/25. The classic
move it or lose it formation for RSI. Then we come to the big move,
well the 3 day RSI succeeded in making a new high. Beautiful.
Now the new high in RS becomes the reference point for any future advances.
Like I said though, only if the price breaks out of this pennant to
the upside will it signal a buy. It may be that it needs some
consolidation, or backing and filling(mealy mouthed terms for "going
down"). This one should be put in a book, it's such a classic.
Doug R |
