Friday, August 20, 2010

LCC Watch

US Airways Group Inc. (LCC) has resumed its downward swing after a two-day bull whipsaw. A fast stochastic bull signal fell short of the 80-line and has dropped back below the 20-line, returning the stock to bear phase.

LCC $8.95

The fast stochastic signal was confirmed by Person's Proprietary signal (pps). The parabolic sar and the macd have been in bear phase since early August.

LCC has been trading in a range since mid-May, between $8 and a bit shy of $11.50. The pattern could be seen as an emerging double top, or even a sketchy head and shoulders.

On the Person's chart, two days of declines brought the stock almost to the lower weekly pivot, a level from which it has rebounded.

Person's Table
ppspps openupper pivotlower pivot
LCC $8.95 $9.11 aug20 $9.71 +8.5% $8.70 -2.8%

Price support and reistance levels give room for movement either way -- 10% to the downside and 27% to the upside. Since we're talking bear phase, the relative risk-reward comparison looks a bit shaky already.

The downside risk depends upon whether we're looking at a continuing sideways trend -- that's the 10% -- or a true downtrend.

LCC hit bottom in July 2008 at a pathetic $1.45, bounced up, retreated, and since March 2009 has been on an upslope.

So despite having been hammered in ancient days, and the despite the inherent risks of a crowded, high-overhead market like airlines, this is essentially an uptrending stock over the mid-term.

A bear signal must count as counter trend.

Reversal Levels
  • $11.40, +27.4% (swing high)
  • $9.87, +10.3% (20-day moving average)
  • $8.95 <== You are here.
  • $8.05, -10.1% (swing low)
  • $5.70, -36.3% (earlier low)
Bottom line: I like the fact that LCC has lots of room to decline, and also that it's trading well below the 20-day moving average. A 10% profit on a drop to the nearest swing low wouldn't be too shabby. However, the signals are counter-trend, and the stock is a sidewinder, meaning prone to whipsaws. Moreover, if this is a head and shoulders of sort (which I don't really believe but who knows), then I'd be looking for another rise to the shoulder -- perhaps around $10.50 -- sometime soon. Disclaimer
Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.
  • sto zone: green for bull phase, red for bear phase.

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