Shares in Affymetrix (AFFX³) have fallen in each of the trading days of this week, and started to fall last Friday with a 'big' 4.9% decline which was followed by another 'big' 5.6% drop on Monday, -3.5% on Tuesday and -0.8% on Wednesday to close at $5.81, down a 'large' 12.1% over the last five trading days. The move filled in the gap that had been left on the chart since the stock rallied strongly in early February.

From a trend perspective, the stock is currently below all the moving averages we track, so it is in fully bearish mode, and to top the dismal news, the 50-day average crossed below the 200-day average to form what many like to call the "death cross" signal, which most consider a portent of further declines.

Is it time to throw in the towel on Affymetrix? There's hope, according to history...

Q: How has AFFX peformed in the past after a 'death cross' signal, where the average price over the last 50 days crosses below the average price over the last 200 days?

A: History tells a different story: according to the 9 previous occurrences of this event in the stock's history, EventEdge indicates that AFFX has shown a very strong bullish edge that peaks 23 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Wednesday, 9 June 2010) is Monday, 12 July 2010. AFFX rallies in 100% of the cases (9 of 9) by an average of 12.7% relative to the close on the event date. The overall return of the 9 cases is 12.7%, which, based on the close of AFFX on the event date ($5.81), provides a target price of $6.55.

Click here⁴ to investigate this trading idea further in EventEdge®, where you can bring up bar charts for any of the previous occurrences of this event, or try different event combinations.

Let variable values:
@	=	GII.AFFX.NASDAQ
theEvent	=	IF
   50 value average of @  crosses below 200 value average of @
THEN 1
ENDIF


      Date   Day            t+5           t+10           t+15           t+23

01/20/1998   Tue          -11.6           11.2           12.1            6.7
05/22/2000   Mon           -8.4           25.7           22.5           22.9
08/17/2000   Thu           24.9           32.8           25.4            8.6
04/11/2002   Thu           23.1           15.4            7.5           13.3
05/09/2003   Fri            5.5           11.2           18.4           12.1
08/09/2004   Mon            3.0           10.2           12.6           15.1
10/21/2005   Fri            5.3           12.3           13.8           22.4
07/06/2007   Fri            2.7           -1.0           -1.7           11.5
12/18/2009   Fri            8.1            7.2           16.0            2.2
06/09/2010   Wed            NaN            NaN            NaN            NaN

             Avg            5.8           13.9           14.1           12.7
          AvgPos           10.4           15.7           16.0           12.7
          AvgNeg          -10.0           -1.0           -1.7            NaN
          PctPos           77.8           88.9           88.9          100.0
          PctNeg           22.2           11.1           11.1            0.0
         Maximum           24.9           32.8           25.4           22.9
         Minimum          -11.6           -1.0           -1.7            2.2
          StdDev           12.2           10.0            8.1            6.8
           ZStat            0.5            1.4            1.7            1.9
        Variance          149.0           99.2           65.0           46.2


10 Occurrences

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Web Address of this trading idea:

http://www.markethistory.com/subscribe/best_of/content.html/16919.html

Links:

¹ http://www.lim.com
² http://www.markethistory.com/content/analog/analog.html?ticker=AFFX
³ http://quote.morningstar.com/stock/s.aspx?t=affx
⁴ http://www.markethistory.com/content/events/stocks/chart.html?ticker=AFFX&events=SMA50xBelowSMA2000&date=2010-06-09
⁵ http://www.markethistory.com/staff/detail.html?s=gibbons
⁶ http://www.markethistory.com/subscribe/best_of/content.html/16917.html

Affymetrix - Cheating the Death Cross

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