Charting First State Bancorp (FSNM)

The way I analyze a particular trade is to analyze the index, industry, and the particular stock at the same time to look for any divergences. It can be called a top-down approach, but Iook at all three at the same time.

First State Bancorp (FSNM) is listed on the NASDAQ, and the index has entirely broken down. As I mentioned in my newsletters, volume has gotten weaker and weaker for the past 4 weeks for every index, and a failure was the highest likely outcome.

The Financial Select Sector SPDR (XLF) is currently trading in a neutral range and holds key support at $20 and resistance at $23. Yesterday, a bearish gap up occurred and formed a hanging man. An area gap has the high possibility of closing within 5 days (90%+ probability). The only positive to note is that the 50-day MA is moving up and has acted as support 2 days ago at $20.80. Keep in mind that today marked a high volume reversal.

FSNM is performing slightly better while keeping its uptrend intact. FSNM made a higher low, finding support at $5.40. However, the stock remains in a neutral range as with other financials. The warning sign comes with the price-volume divergence as the volume has been extremely low on the rallies.

I wouldn’t recommend any trade unless there is a clear indication that a breakout or a breakdown is imminent. If FSNM makes a higher low above $5.50, it is considered bullish. For the brave, high-risk traders, this range-bound trading is a perfect opportunity for short-term swing traders.

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