This chart is of Gabelli Dividend and Income Trust (GDV), which is a closed-end equity fund that has a current value of $1.3 billion and yields 6.1%. The neckline at $15.24 (line b) was overcome on December 23, and since then, the fund has traded as low as $15.10, testing the neckline several times.
GDV has been strong this week, closing Wednesday, January 11 at $15.75. The daily chart again shows a completed reverse H&S bottom formation.
The fund made a high in early July at $17.19 and formed its initial low, the left shoulder (LS) at $13.45, on August 8. Volume was very heavy on this decline, and it peaked on August 5, suggesting that the majority of the weak longs sold on this drop.
GDV rallied back to a high of $15.42, which was just above the 50% Fibonacci retracement resistance level. The increased concerns over the Eurozone debt problems put additional pressure on GDV, as it dropped to a low on October 4 of $12.32, but as was the case with DOV, it rebounded to close well off the highs at $13.08.
Volume on this decline was well below the levels seen in August, suggesting that fewer sellers were pushing prices lower.
The rally from the October lows eventually reached a high of $15.32 on October 27, which was just below the August 30 high of $15.42. The resulting decline ended on November 22 when GDV had a low of $13.82 (RS). This was above the left shoulder level of $13.43.
The OBV confirmed the positive volume pattern, as it moved through resistance at line d five days after the lows. The downtrend from the summer’s highs, line c, was broken in early November. The OBV shows a nice uptrend from the lows and has confirmed the recent price action.
Now that the neckline has been broken, I hope you are able to calculate the upside target using the data provided on the chart. I have added the price levels for both the October low and where the neckline was when this low was being formed. The breakout level was at $15.25, so take a moment now to calculate the potential upside target from this reverse H&S bottom formation.
I hope you have come up with a target of $18.30 from this formation. Remember that this is an approximate target. Before this level can be reached, however, GDV has to surpass the significant resistance from early 2011, line a, which is now in the $17.30 area.
It is probably too late to get into GDV now, but due to the attractive yield of over 6%, I would look to buy at $15.28 or better using a stop at $14.14. If filled, raise the stop further to $14.88 on a move above $16.46 and sell half the position at $17.20.