Today's 3.27% gain has pushed the price of CNXS above the upper resistance of a falling wedge pattern. As you can see from the chart below, the converging trendlines have acted historically as a strong level of support and resistance, but today's break above could signal the end of this confined trading. In general, a break above a level of resistance, like the one shown in the chart, is used by technical traders as a signal of a probable move higher.

We've also added the parabolic SAR indicator to confirm our expected move higher. This indicator places a series of dots above and below the price, which are then used by technical traders to make transaction decisions. Buy signals occur when the dots are below the price, while sell signals occur when the dots are above. Notice how the buy signals (blue circles) occur when the price tests the support of the lower trendline, and how sell signals (red circles) occur when the price bounces off the upper resistance. This chart is interesting because the price has broken above the resistance, but has failed to generate a sell signal - a sign that will be used by the bulls to confirm a move higher.

CNXS_050306.jpg

Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
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