Abbot Labs (ABT)

Charts for this article are available for download in MS Word format at the following link (file name “ABT Charts”): http://finance.groups.yahoo.com/group/HawaiianTradeWins/files/.
Refer to the monthly chart, figure 4. Here we see a possible head and shoulders pattern. Notice the MACD has moved lower in bear waves as price action was forming the three tops. More importantly, during the most recent rally, the fast line (green line) has remained below the signal line (white line).

In figure 5 we can again see the bear waves on the MACD. However, the fast line is still moving higher, this tells us that momentum for this stock remains up. Before entering this trade, I will need to see two things take place: first the general market will have to reverse and second, I will need to see some evidence that the upward momentum for Abbot Labs stock has reversed.

Let’s look at the general market, refer to figures 1 through 3. The monthly chart’s MACD, figure 1, shows a down trend is in place. The weekly chart, figure 2, shows a counter cycle to the down trend is currently in control of the market, (a counter cycle is a short term up trend moving against the major down trend). What’s more, the green line on the weekly MACD is still moving higher. Thus at least for now the counter cycle is still in place. The daily chart in figure 3 shows the momentum is beginning to slow. This is evident in the MACD fast line arching over. What I am looking for is an indication that the counter cycle has ended. For this I want to see a topping formation on the daily chart, complete with a MACD divergence. Absent of this, I would be comfortable entering the trade when the weekly MACD arcs lower, assuming the following takes place for Abbot Labs as well.

For Abbot Labs I am looking for the same thing, a diverging top on the daily chart or the weekly MACD arcing lower. In addition, the monthly MACD fast line MUST remain below the signal line.

Mr. Pipman