Thursday, May 26, 2011

Cosco: reversal ?

Cosco 52 wk high : 2.44 ( 19 Jan 2011)

Cosco 52 wk low: 1.32 (27 May 2010)

Candlestick: White candlestick with little shadow is a testament to the bullish sentiment and a possible reversal.

MACD, Stochastics: Turning up, no negative divergence. Slight positive MacdH divergence.

Resistance: 2.01 (200MA) , 2.08, 2.17

Support: 1.90, 1.79-1.8

Today Cosco closed at 2..00 (+2.4%) with high volume of 34.9M shares traded, double the previous day’s volume of 17.3M shares. This is a positive sign as it shows accumulation as the up volume today was significantly higher than the previous day’s down volume. Also the low of 1.89-1.9 was successfully tested for 3 days in a row (20-22 May), affirming the strength of that support region.

Another positive sign is that out of the 34.9 M shares traded, 27M, or 77% of the total amount, were transacted at 1.97 or higher, which is above the previous close of 1.96. 8.4M and 17M shares were transacted at 1.99 and 2.00 respectively, so there should be decent support in that area. If cosco keeps on making higher and higher lows, it could well be the beginning of a new uptrend.

The chart shows a potential double top at 2.40-2.44 but this will not be confirmed unless the neckline at 1.80 is broken convincingly. Cosco still remains in its uptrend which has been maintained since the lows of 2008. As you can see the lower trendline has been tested (or come close to being tested) convincingly several times , showing the strength of the trend.

Cosco seems to be resisted by the 200MA at 2.01 now. It is therefore at a critical point now, if it clears the horizontal resistance and 200MA at 2.01, it has a good chance of retesting 2.08.

I took a small position today at 1.99, after observing the surge in volume which accompanied the buying.

2 possible strategies:

1) Go long when 2.01 is broken to the upside on high volume

2) Go short when 1,79( Mar low) is broken to the downside on high volume.