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Billabong International (BBG)

(Click here for BBG fundamental research and company information)

Technical View

Although BBG made new recovery highs in April, the corrective phase actually began in October 2009, with a lengthy top formation that preceded the sharp April to August decline (-41%).

The stock broke above the April downtrend in early October, but as with many stocks this first sign of strength was aborted as resistance proved insurmountable. This extended the reversal process.

That resistance was overcome in early November, completing the first stage of the base formation. The next resistance is at approximately $9.30 (a combination of the 200DMA and the July highs). This could delay upside potential.

Despite the potential for an extension of the basing process, the long-term Buy signal (not shown) that was generated in November suggests that a major reversal has been put in place and higher levels are anticipated in 2011.

The initial target is $9.30 - a break beyond there opens potential to $10.41.

The stop-loss level is $8.06.

(click image to enlarge)