Stock Chart Analysis SNDA
Shanda Interactive Entertainment Ltd ADR (Public, NASDAQ:SNDA)
As a trader it's important to keep an eye on the longer term charts in order to gain perspective on the underlying trend. Signals on longer term charts hold more weight than shorter term signals as time filters out some of the noise prevalent on shorter term charts. In looking at SNDA the other night, I noticed it was trading near a descending trend line that marked some recent highs on rally attempts. It broke down in November and quickly reversed trapping some bears including myself. SNDA has been quietly holding above its rising 50 and 200 day moving averages over the past few weeks as it gets close to the trendline. When you look at the longer term charts, you can gain additional perspective on the current consolidation.
Below is a weekly chart spanning the past three years. The first thing that jumps out at me is that the nasty bear market of 2008-2009 looks like a relatively tame correction on this chart. Of course a 50% haircut is nothing to sneeze at, but SNDA easily recovered and was setting new all time highs as other stocks were just bottoming out. The consolidation that has been dragging on for most of this year, appears relatively healthy on a weekly chart, taking on the shape of a falling wedge or bull pennant, which could be labeled as bullish. SNDA appears to have cleared the wedge, although has yet to set new highs. The recent low confirmed the $40 area as support and would be the level to watch for a longer term failure signal. A move above $55 could signal a move to the top of the range and a test of a breakout. Both the daily and weekly charts are in perfect alignment here, and this is a chart that should probably be on most traders watch lists.
Good Trading,
Joey
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