Don't Ignore This Chart!

Chubb Reverses at Key Level with a Gap


Chubb trended lower from July to October, but a gap-laden reversal off a big support zone suggests that this decline may be reversing. More importantly, this decline looks like a correction with a bigger uptrend. Let's look at the evidence for a long-term uptrend. First, Chubb (CB) hit a 52-week high with the June surge. Second the 50-day EMA is above the 200-day EMA. Third, the stock is above the rising 200-day EMA. These indications point to a long-term uptrend. 

Assuming the long-term trend is up, the decline from 130 to 122 (~6.5%) should be viewed as a correction within this bigger uptrend. Note that this decline is relatively modest compared to the prior advance, which extended from 106 to 130 (~22.5%). Moreover, the falling wedge is a typical pattern for a correction within bigger uptrend. 

There are signs this correction is ending because the stock held support in the 120-122 area and held the 200-day EMA. Notice how the stock gapped down on October 20th, stalled for three days and then gapped up. This amounts to a short-term reversal that reinforces support. A break above the October high is the next step to a full reversal of the falling wedge.  

Thanks for tuning in and have a great day!
--Arthur Hill CMT

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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