Technicals | Nov 02 2011
LAYMANS:
The picture for PDN has been turning decidedly negative over the past few months with little evidence suggesting a strong reversal is on the cards. That said, nothing goes down in a straight line indefinitely so the recent show of resilience is only to be expected. Theoretically an interim low could be in position though further evidence is required before getting overly confident that a more substantial rally is going to unfold. If we are looking for positives then there has been a significant increase in volume around the recent lows which suggests accumulation is taking place. That doesn’t automatically mean that a strong, powerful leg higher is going to unfold although it’s a step in the right direction nonetheless. A small pull-back is unfolding at the present time and if this trait continues it will be interesting to see whether those same buyers step up to the plate again. If they do it could well be that a sideways consolidation is going to unfold over the coming months providing some type of a base. This would be a positive characteristic and provide a launching pad for a more significant trend higher to commence further down the track. The problem with the company is that it’s entrenched in a downtrend. With the major lows recently breached it just reiterates the weak relative strength of the company.
TECHNICAL:
With our oscillator in the oversold position both on the daily and weekly time frames we’re technically in a position to see a larger bounce although no divergence is apparent. The positive volume attributes mentioned above can’t be ignored and imply that the 5-leg move from the high of wave-X has likely run its course. Even if we’re only seeing a counter trend move price should rotate up to the line of resistance. Also notice how the 50.0% retracement level shows good confluence with that area making it a logical target zone. This of course offers plenty of upside potential ahead though we can’t get overly confident quite yet. PDN is still sitting beneath the major lows set back in October 2008 so we’ve got to be slightly sceptical and be open to the possibility that something more sinister is unfolding. If the recent high at $1.855 can be breached with a degree of attitude then the bullish case over the medium term remains firmly in position. The one thing we don’t want to see is a swift reversal breaking beneath the low of wave-(v). Should this be the way forward then the stock becomes much more bearish opening the way for significant falls. Not our highest expectation but remember serious technical damage has been done and it’s by no means out of the woods yet. For the moment though we’ll concentrate on the price action over the rest of the week and into next and see whether the recent show of strength can continue. If some traction can be gleaned there is no reason why the typical retracement zone can’t be met though it’s unlikely to be a straight line move.
Trading Strategy
27/10:
One positive trait is that the upper trend line of the falling channel has been breached with price coming back down to retest. If you’re interested in a trade I’d be looking at the shorter time frame as oppose to a longer term prospect. Buying following a penetration above the recent pivot high at $1.86 would be perfectly acceptable with the initial stop just beneath the prior pivot low which at this stage is today’s low. This would offer a reasonable risk/reward trade assuming of course that our target area is going to be met. Just don’t get married to the idea that a powerful, impulsive multi-month trend is going to unfold as it’s highly unlikely to do so.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).
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