Sibling Idolatry: Medquist and Cerner

• Posted by Greg Harmon
• on February 2nd, 2011

Everybody with kids sees how the little one follows their older sibling around, almost worshiping them as a god. This is part of how they grow and and learn from them. It seems to be the same way for Medquist (Ticker: MEDQ) a small $355 million health care technology company following its big sister Cerner Corporation (Ticker: CERN) a $8.3 billion health care information technology company. One stock in a grouping or sector pulling the rest along with them happens often. Is it about to happen again? Lets look at the evidence.

Cerner Corp, Ticker: CERN

CERN, above was in a downward channel from May through September of 2010. When it broke out of that channel higher the price stair stepped higher several times. The last step up to 98 was met with a rounded pullback before settling back into the step, roughly between 96 and 98. With a Moving Average Convergence Divergence (MACD) indicator that is improving and has just crossed higher, it is now breaking that step higher and expanding the Bollinger bands. The Relative Sterngth Index (RSI) is high but not overly extended. The target for this move is 103 based on a symmetrical move to the previous steps higher. Now turn your attention to the chart for Medquist below.

Medquist, Ticker: MEDQ

This chart shows that MEDQ broke higher out of a similar downward channel and has also been stair stepping higher. Additionally as it reached the peak of its last step there has been a rounded pullback and it is now at that peak again. It also has a rising MACD, that crossed a few days ago. The RSI for MEDQ has been bouncing off of the 50 level indicating support for a bullish move. This stock has looked ready to break out higher for several weeks and the move by CERN might be the catalyst to make that happen. If it can break higher above 9.50 then target range on a measured move would be 11 to 11.50.

Trade’m well.

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