© Copyright 2010-2012, MarketHistory.com
Unauthorized mirroring, photocopying, facsimile or any other
distribution of this copyrighted material is prohibited.
All rights reserved.
Discovery Communications - Cross below the 50-day Average 
Tuesday, June 8, 2010
By Gibbons Burke
Discovery Communications has flirted with the idea of crossing below the 50-day average three times in the month of May, but while it traded below that level intra-day, it always rallied above it before the close. June is a different story. The stock has dropped on each of the last three trading days, with a 'big' -5.0% drop on Friday (closing the week with a -4.5% drop after seeing a 7.2% five-day gain as of Wednesday's close, and making a new all-time high on Thursday), and closing on Monday at $36.06 with a 2.4% decline on the day.
The stock has formed a double top pattern on the chart, which is a widely-followed technical signal, and has retreated down to trendline support, actually closing below the trendline. So things look pretty bleak for Discovery Communications.
However, history suggests that the stock has most often rallied after crossing below the 50-day average in the past. Will history hold true in this most bearish of market environments?
Q: How has DISCA performed in the past after crossing below the 50-day average price?
A: According to the 9 previous occurrences of this event, EventEdge indicates that DISCA has shown a very strong bullish edge that peaks 60 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, 7 June 2010) is Monday, 30 August 2010. DISCA rallies in 100% of the cases (9 of 9) by an average of 23.8% relative to the close on the event date. The overall return of the 9 cases is 23.8%, which, based on the close of DISCA on the event date ($36.06), provides a target price of $44.64.
Click here3 to see this trading idea in EventEdge®.
Gibbons Burke4 is editor of MarketHistory.com.
Related Ideas:
- Discovery Communications - Another Trend Day Gain5 - April 30, 2010
- Discovery Communications - Uncovering a Trend6 - April 7, 2010
 |
Let variable values:
@ = GII.DISCA.NASDAQ
theEvent = IF
@ crosses below 50 value average of @
THEN 1
ENDIF
Date Day t+6 t+18 t+36 t+50 t+60
12/01/2008 Mon 5.9 3.4 11.0 5.3 17.1
12/15/2008 Mon 5.2 12.7 7.6 19.8 30.7
01/20/2009 Tue 9.4 2.3 21.1 24.8 30.1
02/04/2009 Wed 1.4 13.9 17.2 32.7 35.3
06/22/2009 Mon 10.9 15.0 23.8 25.8 45.0
10/28/2009 Wed 5.9 13.1 12.5 16.8 10.1
12/31/2009 Thu 6.5 -1.3 4.3 5.8 11.6
01/22/2010 Fri -3.6 2.3 5.0 12.1 16.6
03/01/2010 Mon 3.3 8.1 18.0 23.5 18.0
06/07/2010 Mon NaN NaN NaN NaN NaN
Avg 5.0 7.7 13.4 18.5 23.8
AvgPos 6.1 8.8 13.4 18.5 23.8
AvgNeg -3.6 -1.3 NaN NaN NaN
PctPos 88.9 88.9 100.0 100.0 100.0
PctNeg 11.1 11.1 0.0 0.0 0.0
Maximum 10.9 15.0 23.8 32.7 45.0
Minimum -3.6 -1.3 4.3 5.3 10.1
StdDev 4.3 6.2 7.0 9.4 11.9
ZStat 1.2 1.3 1.9 2.0 2.0
Variance 18.5 38.0 49.3 87.9 141.8
10 Occurrences |
Comments:
Web Address of this trading idea:
Links:
2 http://www.markethistory.com/content/analog/analog.html?ticker=DISCA
3 http://www.markethistory.com/content/events/stocks/chart.html?ticker=DISCA&events=CrossBelowSMA500&date=2010-06-07
4 http://www.markethistory.com/staff/detail.html?s=gibbons
5 http://www.markethistory.com/content/content.html/16854.html
6 http://www.markethistory.com/subscribe/best_of/content.html/16813.html