A Watch

Agilent Technologies Inc. (A), a company that has built a business out of measuring really complex stuff, moved to bull phase after a steep rise on news -- analysts said the company has increased its margin financial forecasts.

The move not only broke above the upper line of the 55-day price channel, it carried the price to levels last seen in February 2001.

sym	chan	adx	traj	psar
A

The stock has been trending more or less sideways since December, and that's reflected by the average directional index (adx), which is languishing in the brown zone, at 19.4.

So the theory upon opening a bull position in A would be that days of happy volatility lie ahead, and the adx represents -- well, the bad old days.

A's financials support a bullish view, with a return on equity of 26.95%. Debt is higher than I would like, at 60% of equity. The company has been fairly consistent the past seven years in delivering sales and return-on-equity growth; less consistent in showing earnings-per-share growth.

The company pays no dividend. It is more than 80% owned by institutions, a condition I count as a positive, because it gives a certain rationality to big moves, rather than putting the price at the mercy of emotional traders.

The stock moved to bull phase on Friday, and today pulled back a bit while staying above the breakout level. The will be under the two-day rule through Tuesday, and so must close above $45.02 today and tomorrow in order to remain in bull phase.

sym	bday	blevel	stop	2-day?
A	mar4	$45.02	$44.06	✔

Friday's high marks the only upside resistance in the past 10 years, and downside support, both the Feb. 23 swing low and the moving averages, is fairly distant.

Reversal Levels

• $46.81, +2.2% (friday's high)
• $45.82 --- You are here.
• $43.30, -5.5% (20-day moving average)
• $42.59, -7.1% (50-day moving average)
• $39.94, -12.8% (swing low)

Bottom line: I like A as a bull play, and will love it even more once the adx gains some slope and pushes above 20.

Key

• chan: Channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
• adx: Average direction index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 30 and up but below 40, magenta (light purple) for 20 and up but below 30, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, purple for sunset on the horizon and brown for the earth.)
• traj: Trajectory of the ADX, green for strengthening, red for weakening or yellow for unchanging. Note that if the adx column is orange and the trajectory column is red, then the position must be closed.
• psar: The parabolic sar, either green for bullish or red for bearish.
• bday: Breakout day, the day the price broke through the upper or lower 55-day price line.
• blevel: Breakout level, the price level of the line that was broken through.
• stop: The current stop/loss price. Early in a bull or bear phase, this will be 5¢ below the low or above the high, respectively, on breakout day.
• 2-day?: Marked with an "✔" if the two-day rule is in effect. Under the rule, if the price closes below the breakout level on each of the two days following breakout day, then the position must be exited.

About channel analysis

Read a detailed explanation of my channel analysis method, including trading rules.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and 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.