PSFT technicals have recently weakened after its second unsuccesful test of the resistance at 61. The stock appears to be in a short consolidation pattern which is being validated by the volume trend. The volume going into this pattern, which appears to be a rather small upward right triangle, has validated the upward movement of the stock.
The MACD is at a juncture where it can turn down. Also, this stock has moved down on Modays market rally, and moved up about an eighth of a point in todays positive market. However, when stock is in a consolidation pattern, I have seen this happen without it necissarily meaning anything. The A/D is moving up a bit indicating some accumulation, and the OBV is staying above its MA.
The weekly chart shows an upward wedge. The volume has been remaining unusually large with volume validating upward weekly moves by the stock. Normally, an upward wedge portends a downward trend by the stock. It appears to be moving down to test the lower trendline of the wedge where it could break down from. However, because of the volume picture, I am not convinced that the price will break down.
There are definitely mixed signals on this one. However, as you noted, something is going to happen. If it does not validate the upward trendline of its short term uptrend tomarrow, then I think it will break down and test 55 3/4. If it breaks through this, then a downtrend will have resumed. If the trendline is validated, then it will retest the resistance at 61 which by then will be in a better position to break through.
This stockis defintely in a precarious position. If I had to palce a bet, I would say that the upward breakout will occur. The rule here is to assume trend is intact until invalidated. Even though today's price action is beginning to call into question the shorter term uptrend, it has not been invalidated yet. If it does move up, it can be in the form of a "pop" in price as its breaks through the resistance at 61. It is in a good position for this pop in price. Also, the DAHL, which is an intermediat term trend indicator, turned up when the stock broke out of its downward wedge. It is still climbing.
Tomarrow should be a key day for this stock. If PSFT pops up under good volume tomarrow and breaks through 61, I will jump in for a quick few points of profit.
Bob Graham |
