Reading the Charts of McGraw-Hill (MHP)

02/05/2010 12:01 am EST

Focus: STOCKS

Lately I’ve been following the book publishers and I wanted to take a closer look at some charts of McGraw-Hill Companies (MHP).

I really like the chart for this stock, and the biggest issue I have right now is more with the general markets than with this stock. It’s possible that there is enough of a catalyst with the introduction of the AAPL iBookstore to shield this group from a minor correction. However, if the markets suffer a deep correction or worse, then it will probably be inevitable that MHP will follow suit eventually.

The short story is MHP recently gapped above a prior breakout and consolidation. It is now forming a flag, which could lead to a follow through if cleared.


Click to Enlarge

Now let’s take a look at the weekly chart:


Click to Enlarge

The prior breakout in December followed by a consolidation above the breakout shows up much more clearly in the weekly charts. As long as this breakout doesn't fail, it looks like the logical move is a test of the prior high near $45. However, it could be that the underlying trend has changed here as well.

If you notice, MHP has been in a clear pattern of lower lows and lower highs. That changed last autumn as MHP set a higher low. It followed it up with a higher high on the December breakout. While this is positive, the real test will be that high just above $45.

There are several different setups here, ranging from a swing trade to a longer-term position trade, so please exercise your own due diligence if you decide to trade this. I don't have a position in this currently, but will be monitoring it over the next few days to weeks.

By Joey Fundora, aka “Downtowntrader,” trader and blogger at Downtowntrader.blogspot.com

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