Laboratory Corporation of America (LH) reported earnings today and surged above the 50-day moving average on the results. The trend since late July remains down, but recent price action is constructive and a breakout could be in the offing. The stock surged around 20% and hit a 52-week high in July. The 50-day moving average is above the 200-day and price is above the rising 200-day. Thus, the evidence supports a long-term uptrend. This indicates that the decline from July to October was a correction within a bigger uptrend. Notice how the stock retraced around 61.8% and formed a falling channel.
Signs of buying pressure showed up in late September and October. Notice how the stock formed a hammer on high volume in late September. This shows a selling climax and an intraday reversal. The stock tested the late September lows in October and surged with high volume last week. Earnings came out today and the stock surged above the mid October high. These two high volume moves affirm support in the 148 area. Moreover, the makings of a trend reversal are there and a follow through breakout at 156 would complete the reversal.
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--Arthur Hill CMT
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