Time Warner Inc (NYSE:TWX) (Closed: $66.20, Up: 2.05%) opened flat but soon gathered momentum to rally to hit a new 6 year high and closed near the high. The news about the company willing to offer HBO Go through a third party ISP encouraged the buyers as it made its third consecutive positive close. The volume at 7 million remained much higher than the average volume of 4 million. The price action created a 3 candle pattern called Three White Soldiers, with very strong bullish connotations though sometimes the price retrace a bit after this pattern before resuming the upmove again.
The stock had a tremendous run in the period of 1996 – 1999, when it rose to an incredible high of $263 from the measly low of $4.19. After correcting sharply about 60% of its value, it bounced back more sharply to record a higher high at $288 in the same year. But the IT bubble burst brought a bear market that never really ended for the stock. It fell like a rock to $26 by the end of 2002 and all the next bull market could do for the stock was to take it to $69.75 by early 2007, not even 38% retracement of the last part of the fall. Obviously the bear market of 2008 brought a new low for the stock at $17.81.
Now the stock is showing initial signs of making a long term reversal as it has broken out of the huge channel containing the entire price action from the 2002 bottom of $26.10. The price has taken a perfect support on the upper boundary this month and made a new high. It is facing the challenge in the $68 – $69.50 zone and another supply zone in $78 – $79 in the coming days. But the investors could accumulate the stock on any dips with a strict stop loss below $60.
