Technological evolution has a way of laying waste to the corporate landscape, and
has been a case study. With the digitalization of the world, its core business was removed from beneath it at a rapid pace. Add to that the devastation the general markets suffered, and it is a wonder Kodak was able to keep its doors open.
The charts are starting to show signs of change though, and that is interesting.
Here's the long-term view. Notice the high-volume bar from September 2009. That bar becomes the test of this advance.
With a nice uptrend in place since the March bottom, the real test comes now. Can EK get over that high-volume month with volume and stay over it? If it does, that would say a huge amount about this company. If it doesn't, then it is back to consolidating and trying again.
On the weekly chart, we see that it is attacking that area with volume.
The importance of this test can't be understated. If Kodak is unable to get over this area with expanding volume then it is necessarily held back into a consolidation range. That range, as we can see on the weekly chart, is from $4.25 to $7. That is a nice range to trade, but the better trade occurs if EK can jump the highs and create a higher floor above this range.
On the daily chart, aggressive traders can trade these lighter volume pull backs into support with the idea of the highs being tested again.
The gap area shouldn't get filled if EK is going to break out quickly. That is your backstop.
My preference, however, would be to let Kodak prove itself and break out. I don't like the fact that most of the volume was on the initial thrust up (gap up) without reasonably significant volume on the follow-through day. I also don't like the fact that volume expanded on the dark candle lower.
The best buy is the breakout/retrace scenario based on the weekly chart. In this market, you almost have to trade the weekly charts for now. I prefer a break over the highs on the weekly and monthly because it is the lowest risk trade. There are plenty of other charts to trade now in which the reward-to-risk is just as favorable, if not more.
Until next time, just keep trading the charts!
At the time of publication, Little had no position in the stock mentioned, though positions can change at any time.
L.A. Little, author, professional trader and money manager, writes daily on
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His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.