Friday, April 8, 2011

NOL : Out of downtrend ?

Today NOL closed at 1.99 with good volume of 27 m shares traded. Prices touched a high of 2.01 which was again not sustained into the close..

Things seem to be brightening up for NOL as it seems to have moved out of the downtrend channel and into a slight uptrend(see chart). Also it managed to close above the 20MA. Sustained closes above 20MA would indicate that the trend is indeed changing. Important resistance is at 2.02 as this level was tested unsucessfully several times in the past. If 2.02 is taken out, 2.10 will be a possible target. Immediate support is at 1.94, However STI is currently overbought and I think the price is likely to see consolidation for a few sessions before moving higher.

I also noted that the Bollinger bands are tightening, indicating that a large move is near.

Why I bought NOL at 1.93 last Friday?

1) Gentler slope of downtrend indicating that selling pressure is easing

2) Slight positive Macd /RSI/Stochastic divergence as seen in the chart. Prices made a new low but Macd/RSI/Stochastics edged up.

3) Strong support at 1.87-1.92 region (Aug 2010 low, Fibonacci support)

All these factors indicated that the downside is minimal and so I took a small position.

Watch the next few sessions. It will be a good sign if the price can maintain above 20MA and 1.92 is not broken.

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