Technical Trading Alert

Covidien Ltd. (NYSE: COV)

Friday, September 12^th, 2008

Covidien Ltd. (COV) is in a strong new long-term up-trend. The stock is making higher highs and higher lows above a rising 200-day moving average (the red line in the chart above). Relative Strength Differential (RSD), our proprietary indicator for selecting super-strong stocks (the green histogram on the above chart), has recently crossed above the 25% threshold line, indicating COV is now strong enough compared to the S&P 500 to be considered as a candidate for a buy.

COV made its most recent major corrective low when it hit 45.73 in late June, marked as point 1 on the chart. From there, COV rallied to a new high of 55.69 in early September, labeled as point 2 on the chart. COV pulled back, made a higher low, and turned back up. On Thursday, point 3 on the chart, COV rallied to a new high with a white candlestick and above-average, rising volume, closing near its high of the day and above the previous high for a new high.

At new high, this setup is good for a daytrade only. Daytraders would want to buy COV only when it goes .02 above Thursday’s high, but not if it gaps up or triggers in the first 30 minutes.

Therefore, if COV doesn't go above 56.97 before 10am EST Thursday morning, place an order to buy COV at 56.97 Stop Day. Then, as soon as your order is filled, immediately place a stop order to sell COV .03 below whatever the low of the day is at the time the order triggers. Then, if the stock continues to rally throughout the day, keep raising your GTC sell-stop until the stock gets sold automatically or exit your position at the close.

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