Options Trading News

January 12, 2009  Mon 10:26 AM CT


Intuitive Surgical Chart

Intuitive Surgical has fallen into a bearish trading pattern on its weekly chart.

The pattern, which appears just above the vertical white line on the chart here, became active when the stock broke below $116 in recent days. The measuring implications suggest the possibility of a move down to $50, which would put the stock back to levels last seen in 2005.

Before reaching $50, however, there is a good deal of support at the $81 area. These were lows that were tested before the stock broke out in 2007.

At this stage it would take a move back above the $120 area to invalidate the pattern. While there is no guarantee that the pattern will reach the downside potential, the implications are bearish for the stock unless something new can turn traders positive on the name.

The company, which makes surgical systems, has fallen along with many other medical equipment manufacturers as hospitals tighten their budgets and cut back on capital spending. In addition, so-called momentum stocks--a category that ISRG once belonged to--generally receive harsh treatment when they fall out of favor.

(Chart data provided by Thomson Reuters)

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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