FAS Friday

FAS continued it sideways movement on greatly reduced volume. The entire market seemed quiet, perhaps in anticipation of GM going into bankruptcy. It is indeed a somber happening.

The 60-minute chart shows that it also broke through a short-term downtrend line in the last hour of the day. Had it followed the pattern of the previous days, it should have drifted down to the support line around 8.75, closing near that amount. Instead it hovered near the upper end of the trading range the entire day. Often before breaking out, price will retrace only a small portion of a range before turning to assault whatever constraint it is facing. It did this today.

The 3-minute chart shows FAS remaining within the day's narrow support and resistance levels until a few minutes to three o'clock. It then turned up, taking a run at its resistance level. After hesitating at that level for a few minutes, it blew through on increased activity, closing at ten and near the high of the day.

The ten level is significant for a couple of reasons. First, just because it is ten. Stocks tend to treat round numbers as support and resistance levels, or more correctly, traders and investors do. Limit orders tend to bunch around round numbers, especially even multiples of ten. Second, the previous resistance level broken when FAS ran up to its recent high of 13.27, was 10.06. The high today was 10.09, close enough. It arrived at that level right at the closing bell, so had little time to challenge it.

The runup late and close at the high indicates traders want to have a position on Monday morning, expecting a gap opening. Traders tend not to want to hold positions overnight and especially over weekends because that leaves them vulnerable to surprises during periods they cannot trade. This last-minute action portends good things coming.

The price action today was not a breakout from the Bollinger squeeze. That requires a close outside the upper Bollinger band, which is 10.42 (13-day) and 10.73 (2-day), assuming a breakout upwards. It may happen Monday. The price pattern over the last week has put in three bottoms around 8.60, and today closed above the highest point in that pattern. A price target should be above 11. At 10.71, the pattern of a wider double or triple bottom confirms, extending the target to approximately 12.

Best of all, price closed today outside the pennant. That provides a target of (13.27-5.06)+8.28=16.47, based on the premise that "the flag flies at half mast." A more conservative target calculates at 13.19. The Point & Figure Price Target remains at 27.5.

Monday should be an interesting day.