A chap I do some contract compliance work for said he thought...

A chap I do some contract compliance work for said he thought ABC was a good buy because it had been sold off and the building industry's prospects were looking up. I did a quick analysis for him and thought I might as well drop it on HC as well.

I had a look at ABC and it could be a good buy. It broke down out of a rising channel last April – first time for a decade (read -not good!) but see how it has fallen exactly to the red line under the stock’s lowest prices (long term support line). This also coincides with a resistance level so it may arrest the fall. Price has risen a little over 5 weeks and on the weekly chart today made a higher high, preceded by a higher low (a buy signal). Price also made a double bottom recently, something which predicts a very strong rise in price. Stock is still in a formal downtrend so (for me) a buy would be premature. Ideally, I’d like to see price rise above $3.365 to think it was going to keep going and not fall back through the support. ABC also makes me nervous because it is one of only a few liquid stocks that doesn’t make a definable Elliott Wave pattern – something I rely on to tell me where a stock is in its price cycle.