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Atrion Charts: Unquestionably Bullish

Atrion's trading volumes are thin and its share price is high, so a conservative trading approach is warranted.

By L.A. Little of tatoday.com, author of Trade Like the Little Guy.

Atrion

(ATRI) - Get Report

, a maker of components for the medical and health care industry, continues to grow its year-over-year top line and bottom lines in a tough economic climate. Atrion's share price has pushed to all-time highs and as recently as Friday touched new ones.

Atrion is a micro-cap on the border of becoming small-cap in size, but volumes are thin and share price is high so a conservative trading approach to the stock is warranted. The charts are unquestionably bullish though and thus we're covering it here.

On a long-term basis, Atrion has crossed above the previous all-time highs and it did so on rising volume. That confirms the long-term time frame as bullish. After four months of consolidation at those highs, the former resistance becomes strong support. In the long term, Atrion has a solid foundation to build upon.

In the intermediate term, Atrion delivers a lesson in swing point tests -- both in terms of a failure and a success. Take a look.

In June, ATRI traded higher on increasing volume, making a swing point high at roughly $136 near the end of the month. That high was retested and broken on a closing basis in mid-August, but volume was light. Not only was it light, but it was very light and that was the failure.

Although prices held and even worked higher through September and early October, prices pushed lower by the end of October in rapid fashion. The selling resulted in a retest of the breakout area from June and, as you can see on the chart, the volume was insignificant on the retest as compared with the volume in June. That was the success.

The successful retest served to regenerate and correct the failed breakout that took place in August. Regeneration of failed breakouts and breakdowns happen all the time and are great places to get on board for the next move. In fact, they are the ideal time for entry because the potential risk is at its lowest while the reward is at its highest. In this case, ATRI has moved higher since that retest to the tune of roughly $25.

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On the daily chart (the short-term time frame), Atrion is once again bumping into prior resistance -- the prior swing point that was registered in September.

Notice how volume is swelling as that swing point is tested. That's a very bullish scenario and, from this trader's perspective, it is telling us that a breakout is most likely imminent.

When price pushes a swing point and volume expands, that is an excellent sign that an entry can be made. This is true of downside and upside swing-point tests. Even though the best buy is to catch the retest or regeneration, there's nothing wrong with buying the breakout as well when it behaves such as ATRI.

So until next time, keep trading the charts!

Please note that due to factors including low market capitalization and/or insufficient public float, we consider ATRI to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Little is long ATRI.

L.A. Little is an author, professional trader and money manager who writes daily on

tatoday.com

, a free educational site for traders and investors. He has been featured in Stocks & Commodities magazine and is the author of

Trade Like The Little Guy

.