Boston, MA 09/30/2013 (wallstreetpr) – United Continental Holdings Inc (NYSE:UAL) (Closed: $30.91, Down: 9.28%) opened with a huge gap down and after some feeble attempt to recovery, closed on the day low. The news about the company lowering its third quarter outlook weighed heavily on the stock as a disappointed market went all out to sell it. The price action created a very long bearish candle, firmly establishing the short term top at $34.39. The volume surged at 13 million against an average of 4.5 million.
The stock had made its first major bottom at $21.90 in 2006 and rallied to $51.60, where it created a Double Top reversal pattern in 2007. The bear market clobbered the stock as it hit $2.80 in just 9 months. It made an Adam & Eve Double Bottom there and ran to make a high at $29.75 by the end of 2010. A 50% retracement later, it hit a higher high at $36.74 in 2013 and the current fall ensued. If the entire rise from the 2008 bottom of $2.80 is drawn in a channel, then we can see the latest top getting rejected from exactly the median line, not a great sign of strength really. The last major top at $36.74 also touches the 2/3rd or 66.6% retracement level of the entire fall from the 2007 top of $51.60 to the 2008 bottom of $2.80.
On the other hand, support lies in the zone of $25 – $27. A break of this zone would signal the end of the multi-month rally and effectively the entire bull market from the 2012 low of $17.45. From the top of $36.74, we can see clear 5 waves down to $27.32 and 3 waves up to $34.39, implying the current fall to be the C or the 3rd leg of the fall. The trend is firmly down with the volume increasing in the drops. Investors should keep an eye on the $25 – $27 zone to gauge the major trend.