Earlier this month Cypress Semiconductor (CY) broke out on the upside from a seven-month rectangle formation. A rectangle formation is one of a number of continuation patterns that chartists have observed over the years. The odd names like rectangles and triangles date back to the 1910s and are just empirical observations by traders.
These patterns are largely subjective and difficult to test but let's check out the charts and indicators on CY anyway.
In this daily bar chart, above, we can see that CY has been unable to make a sustained push above $16.00. Prices are likely to close weak today and decline further to retest the upside breakout around $14.75 or so. I would not rule out a decline to the $14.50 area to test the 50-day moving average line.
The daily On-Balance-Volume (OBV) line has been rising since early May and made a new high before prices broke out to new highs. Volume has been declining, however, from late June. A rising market with a shrinking volume pattern is not a healthy or strong market. Prices have not declined much but we can already see a take profits sell signal from the Moving Average Convergence Divergence (MACD) oscillator (lower panel).
In this weekly bar chart of CY, above, we can see that prices are above the rising 40-week moving average line. The weekly OBV line shows an uptrend from early 2016 and this confirms the price strength.
The weekly MACD oscillator has turned up from above the zero line for a fresh outright go long signal. The $14-$13 area is likely to act as support.
In this Point and Figure chart of CY, above, we can see the recent decline and that support is likely to develop around the $14.50 area.
Bottom line: Because CY was not very extended on the upside like some other tech names and significant chart support is nearby, we should only see a mild and shallow correction for the stock.