Covidien is ‘Tired’, ‘Poised’ and ‘Resting’

Covidien, $COV, stock has had a great run higher out of the bottoming process of late 2011 into early January. Now, depending on your point of view it is either ‘tired’ or ‘poised’ and ‘resting’ for the next move. Whatever your definition of consolidation this stock is serving up an opportunity. Take a look at the chart below. The consolidation began after a move back above the high from March

Covidien, $COV

through May of 2010 at 51.20. This level up to the top of the consolidation zone at 53 also played a roll in March 2011 on the way higher and the summer of 2011 as support on the ride lower. The point is there is a lot of price history in this range. You can make a case for a bullish break out with the Relative Strength Index (RSI) bullish and in the mid 60′s or for a breakdown with the Moving Average Convergence Divergence (MACD) indicator growing more negative by the day. But zooming in to the last 9 months of this chart, below, highlights what makes it interesting for me. The Bollinger bands, a measure of volatility are squeezing getting very tight. This portends a move very

Covidien, $COV

soon. My bias would be to the upside and a break of the consolidation or bull flag higher has a Measured Move to 59.50. If it breaks to the downside support comes at 48 first. $6 of upside or $4 of downside. So why not just take the trade it gives you instead of biasing your view with words like ‘resting’, ‘poised’ or ‘tired.’

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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