ROC has snuck under the radar of most as it quietly lifts off a twice tested low at $2.80 to successfully test Trend Reversal resistance at $3.25 opening up some previously off limits higher levels as the stock moves into trending mode.
Our Energy sector is lifting off again as the oil price stabiles its decline from the highs at US$50/55 and shows a new propensity to rally again as tighter times loom for this market and our quota of trending stocks in the sector has been quietly building as STO WPL ROC OSH have all qualified recently to add to our incumbents of WOR, PDN and ORG.
ROC provides a clear example of a Trend Reversal in the making and is not dissimilar to recent reversals delivered by WPL and OSH. The following is our process from which we build our argument for a Trend Reversal using ROC as an example.
Volume patterns have been developing the normal bullish associations with price as the ever declining price trend finally attracts a big wave of buying at $2.80, which is the first big clue for a bottom. The retest and hold is the second clue and the sellers are suddenly wary! A rejection such as this leads to a test of the other end of the trading range which in ROC’s case is $3.25, the top of the recent trading range that is currently defining our base structure for ROC.
Easily surpassed on steadily higher volume levels and enough for us to call for a reversal of trend as it satisfies our simple reversal criteria of lower lows highs and lows reversing to a pattern of higher highs, above $3.25, following no new low struck below $2.80. After the two unsuccessful attempts to drive the price through the support at $2.80, the sellers have, in typical and boringly repetitive fashion, retreated under the weight of the buying and in fact the bullish buying sentiment has been so strong the retreat has turn into capitulation to the extent that a Trend Reversal above $3.25 has now been completed on high turnover paving the way for the new controlling buyers to forage higher.
“Sister” stock confirmation, always useful especially when considering stocks with such strong underlying drivers such as the oil price or gold price, comes from OSH and WPL two weeks ago, and STO a month ago prior to its extraordinary rally, with all these stocks putting solid foundations (check the turnover going through the STO register prior to its advance) below the price from which to leverage new trending moves higher, which so far are developing with the appropriate response and respect to their Trend Reversal structures.
Ahead looms the resistance at $3.75 and with each of these resistance levels there lies a challenge to the existing trend and if passed it delivers another mark of trend strength. That’s why momentum traders buy these breaks as it is odds on that it is re-confirming the trend strength and direction. If not money management stop losses are there to protect you. Aren't they? So the level at $3.75 will helps us assess the strength of this new trend and the likelihood of ROC testing the ultimate highs at $4.50. One step at a time, first the Trend Reversal, then we continue to monitor trend both for signs of strength, and weakness.
The Trend Intensity rating for ROC climbs and hits a qualifying level of 6. The minimum requirement to confirm a Trend Reversal is a rating of 4. So ROC qualifies with price and volume providing the initial platform for the rise with subsequent indicators developing a more bullish tone but yet to provide complete consensus as we enter the very early stage of this rally.
A common sense rule based process and appraisal of a stock potentially changing its trend. Next major resistance is at the highs of $4.50."
ROC Price at posting:
0.0¢ Sentiment: None Disclosure: Held
(20min delay)