STATS ChipPAC displays technical signs of accumulation.

Chartists often consider accumulation as periods of sideway price movement followed by subsequent expansion in price and volume. Accumulation periods can range from weeks to months during which trading volume is low.

During this period, speculators turn to other stocks but determined buyers use the lull to collect. For a higher probability outcome, the stock should be in an up-trending mode with clearly observable support. Chart readers do not confirm the observation until price explodes with high volume. Speculators often look for this explosive moment to capture the subsequent price rally.

A Chinese-educated student of mine once called it the ‘stair-climbing’ effect.

STATS ChipPAC shows these signs:

1. 3-4 months of sideway movement supported by 100-day exponential moving average (yellow line in chart; support marked by blue arrows)

2. Low trading activity during the period

3. Accumulation is followed by price rally on expanding volume (see shaded boxes)

4. Stock is in uptrend as it has managed to stay above its 100-day and 200-day moving averages.

Patient investors can wait for the next period of accumulation to collect. It would be worthwhile to investigate whether such technical signals are supported by other signs in the business fundamentals.
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