Intraday Analysis: Broken Support Yet A Bullish Divergence

This post originally appeared during market hours on the stock market forums – 3-30-11

We are seeing a bullish divergence intraday in Exelixis (EXEL), which can only happen as the stock downtrends. That means the indicators are showing good signs beneath the price weakness (see chart). While this is good news, this doesn’t make a clearcut decision. We have broken two key support levels at 11.65 and 11.37 making the decision tough. Over the past two hours, we have stayed near the support level of 11.37, moving slightly above and below it in an accumulation fashion with strong green volume and weak red volume. It appears the bids weaken near 11.40 allowing for a quick fall rather than sellers pushing down the price. This implies that the bulls are around, just not paying up to accumulate as they’d rather wait for it to fall to accumulate. This is obviously good and bad if you are already in the stock and gives reason to believe the bulls will need more time as they are being patient. Bulls are around, just not paying up at the moment. If you can handle the pain, this will be good to reload your position. If the pain becomes unbearable, this is very tough and hard to add. Ensure you manage your risk correctly.

My stop loss was triggered to ensure I could walk away with profits but not the entire position. I have a smaller position now and am looking for more certainty that these levels will hold before I aggressively add. Keep your eyes peeled as this war is far from over. See the chart below for more analysis.