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Noel Campbell Once again this week I'm going to divert my attention from futures across to one of the stocks that make up the Dow Jones Industrial Average, Pfizer (PFE). Aaron Lynch, John Jeffery and I have been busy with our 3-Day Trading Workshop and each week we continue to come across exciting trading opportunities in markets we may not have previously been watching.
First and foremost I am a trader and therefore look for shorter-term profit opportunities, rather than longer investment opportunities. The potential set-up in PFE looks to me like both a great trading opportunity and investment.
In Chart 1, I have the weekly chart taking in the entire bear cycle of PFE. As you can see it's been a long hard road for PFE over the past few years. However being part of the Dow Jones Industrial Average you would have to believe this is an established stock that would have the ability to recover from a bear cycle. The all-time high for PFE is $50.00, 50% of this is a simple $25.00. The first amazing point to identify is that the major low in July 2002 came in almost exactly at this 50% level. No matter how long I have been working with Gann, this kind of stuff always gets me excited. The second thing to note on Chart 1 is how the recent spike low in December 2002 certainly appears to be nothing more than a false break of the July 2002 low.
Chart 1
click chart for more detail
That’s the bigger picture taken care of, now it’s time to take a closer look. Chart 2 is the more recent market action on the daily bar chart.
Chart 2
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The first thing to point out is that the low formed in December 2004 certainly appears to be an oversold low. At almost all major lows on established securities, the market gets oversold, it’s just not always as obvious as in this case. PFE initially bounced from this low, but that lasted all of about 10 days and then the daily trend turned down once again.
This last move toward the oversold low appears to be the last of the ‘scared’ owners of the stock who have held on for the ride down, finally saying enough is enough and closing out their positions. That seems like a harsh way to look at it, but may be closer to the truth than you think. It looks to me like the selling pressure is gone as a force and PFE is forming its first significant higher bottom. The other point about a pattern like this that I have used in my trading in the past is that the time between the December low and the recent 1 February low is 45 Degrees. This is a pattern I have seen many times before and one that can be a useful guide for a new move higher.
Until next week......
Noel Campbell
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