Stock Chart Analysis STP

Posted by downtowntrader | 11/09/2009 11:25:00 PM View Comments

Stock Chart Analysis STP
Suntech Power Holdings Co., Ltd. (ADR) (Public, NYSE:STP)

STP looks like it is getting ready for a sharp move, and while it is currently in a bearish setup, traders should be on guard for a move in either direction. STP had been trading in a large base since early May, when it peaked after a tremendous rally off the March lows. STP had been oscillating between roughly $13-$20 as it consolidated for almost half a year. The first bearish clue appeared in September when a rally attempt in STP failed to move to the top of the range, and ended up resolving as a lower high. STP did hold up above the September 2nd low on the pullback from the lower high, but the bounce was even weaker than the preceding one, and STP followed through a few weeks later undercutting that low and the 200-day moving average in the process.

STP has been consolidating this breakdown in a tight range for about two weeks, and could be setting up for a continuation move lower. A consolidation below prior support is often a bearish development and STP could probably be shorted on a break below $12. However, and this is a big however. The current market has been punishing bears, and many promising looking short setups have been completely invalidated by the market's strength. While the setup favors continued weakness, there is a possibility that a short squeeze could occur. STP has earnings coming up in a week and a half and is still technically at the lower bounds of the existing base. The level on the upside to watch here, at least near term, is the $14 area which coincides with the 200-day moving average. A move back into this area could trigger some short covering and force prices higher.

Good Trading,


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