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Got the Blues?
by kensey

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Arterial Vascular Engineering (AVEI)





The late April volume that drove AVEI dropped to a price level where the support line was heavy and did some damage. This period of selling is represented as a relatively high stack of red bars on the volume graph.

Then, in early May, AVEI started to rally. But note that the corresponding stack of blue bars is shorter than the red bars that piled up when this stock was on its way down. This suggests that this reflex rally is relatively weak in nature; it's occurring on lower volume.

When this reflex rally within a bear trend dies out and the selling returns, it will be important to note whether volume once again increases. Stocks that get hit this hard usually retest their lows. This means that prices will probably dip back down to the support line.

Remember that if the red volume bars stack higher than the preceding blue volume bars it means that Arterial has a shot of breaking through support and it could be a short hop down to 25. (You can tell that my inclination here is to be bearish!)

But, if the retest of support is on weak volume, Arterial would likely bounce off the support line and head toward recovery. Note that the weakness of the MACD lines suggests that there's a long road ahead for this stock.

In any case, this assessment will be possible due to clear color coding. Its relative height is most important. If the blues stack higher, that's bullish. If the reds stack higher, that's bearish.


Next: It Rallies Tomorrow, Right?


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