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Cup with Handle or 1-2-3 Reversal

August 16, 2010 by 3 Comments

As September nears, we should all be asking the question:

Is the market headed for a reversal or an “up” trend continuation?

I don’t know nor does anyone else but what we can do is sit tight and get ready to trade the confirmation, whether it is up or down. A break of support is a signal to begin shorting the market. A move above resistance will be a signal to buy breakouts.

It’s that simple. See below for the three major indexes and their current support and resistant levels:

Filed Under: 1-2-3 Pattern, Technical Analysis

Trend Reversal Coming…?

June 17, 2010 by 9 Comments

Will the Nasdaq, Dow Jones Industrial and S&P (SPDR’s) confirm the 1-2-3 Trend Reversal like Blackrock has?

Time will tell, give it another 1-3 months to confirm (September may be the time but I can’t tell you for sure). Wait for the confirmation before taking the short trade. A move above the “blue” line breaks the pattern setup!

I can tell you this: The trend has been challenged, the minor low has been established and now we are looking to work on “point #2”. A failure to recover the blue line will establish point #2. A violation of the horizontal red line will confirm point #3 and trigger the short play: TREND REVERSAL CONFIRMATION.

061710_SPY_wkly

061710_COMPQ_wkly

061710_INDU_wkly

061710_BLK_wkly

Filed Under: 1-2-3 Pattern, Technical Analysis

1-2-3 Trend Reversal Watch

June 8, 2010 by 12 Comments

Traders must have patience as “we” look to capitalize on the 1-2-3 pattern. Using the chart samples below (real time 1-2-3 pattern confirmations), we can see that the typical setup takes anywhere from 4-6 months to confirm. Continue to follow me on Twitter as I will be highlighting the dozens of potential candidates over the next several weeks.

I can’t say that all or even if many will confirm but if the major indices confirm the pattern, it will be like taking candy from a baby on the short side. As you may know, nearly 75% of the stocks in the market follow or move in the same direction as the overall indices.

This could get fun. I am currently looking for a short term bounce in the general market and the stocks on my “short” watch list (point #2 confirmation). After point #2 forms, we then start to load up (on the action watch list) and look to short upon confirmation.

Recent posts reviewing the 1-2-3 Pattern:

Two sample stocks confirming the 1-2-3 pattern and two starting to confirm the pattern: MSTR, PKX, ADBE and TECD

060810_MSTR_wkly

060810_PKX_wkly

060810_ADBE_wkly

060810_TECD_wkly

Notable stocks with the 1-2-3 pattern potentially forming:
MA, V, GOOG

Stocks with their 10-week moving average crossing below their 30-week moving average (this week):
NBL, JNJ, AGU, BBL, HPQ, SNN, UNF, MAN, ACN, HMC, MR, MEE, DWA, PEGA, ASML, CE, MSFT

Filed Under: 1-2-3 Pattern, Technical Analysis

Google (GOOG) 1-2-3 Trend Reversal Confirmation

May 25, 2010 by 8 Comments

Google (GOOG) has setup the Trader Vic 1-2-3 pattern or a Dow Theory confirmation of a trend change.

052510_GOOG_wkly

As you can see:

  • GOOG broke the up-trend after establishing a new 52-week high above $629 (point #1).
  • From there, it consolidated and formed what is referred to as the minor sell-off (the lower horizontal red dotted line).
  • Prices started to rise but failed to make another new high. This test of the previous high failed near point number 2 (March & April).
  • A failure to make a new high is usually (not always) a signal that the trend is about to change. This is where some traders jump in early.
  • Lastly, we reach point number 3 where prices drop below the previous short term minor sell-off (this is trend reversal and the signal to short). If missed, you can short on the first failure to recover the major moving averages (or #3 area which then turns to resistance).

This is the pattern I am watching setup in dozens of stocks across multiple industries. I am also watching this pattern to potentially setup in the major indices as well.

Remember, have patience and be prepared to sit on the sidelines for a while as this pattern takes time to build and then confirm (4 months for GOOG). The key word is CONFIRMATION!

You may play GOOG up and down short term but long term, the trend has changed!
Follow me on twitter to watch the stocks currently setting up this pattern (prior to confirmation).

Filed Under: Selling, Shorting, Technical Analysis

Trader Vic 1-2-3 Trend Reversal Pattern

May 17, 2010 by 8 Comments

Blackrock (BLK) setup what Trader Vic would term as a 1-2-3 setup or a Dow Theory confirmation of a trend change.

051710_BLK_wkly

As you can see:

  • BLK broke the up-trend after establishing a new 52-week high above $242.
  • From there, it consolidated and formed what is referred to as the minor sell-off.
  • Prices stared to rise but failed to make another new high. This test of the previous high failed near point number 2.
  • A failure to make a new high is usually (not always) a signal that the trend is about to change.
  • Finally, we reach point number 3 where prices went below the previous short term minor sell-off (this is trend reversal and the signal to short). If missed, you can short on the first failure to recover the major moving averages (or #3 area).

In addition to the 1-2-3 setup, the stock has also allowed its 10-week moving average to cross below the 30-week moving average with typically signals a change in trend when both lines are starting to point down.

Victor Sperandeo says this about the 1-2-3 setup:

At the point where all three of these events have occurred graphically, there exists the equivalent of a Dow Theory confirmation of a trend change. Either of the first two conditions alone is evidence of a probable change in trend. Two out of three increases the probability of a change in trend. And three out of three defines a change in trend.

Take a look at the picture I scanned from Sperandeo’s book on page 76:

092607_123_book

This is essentially the pattern I am watching for in several of the stocks starting to churn (run out of steam) that I posted to my twitter stream. However, have patience and be prepared to sit on the sidelines for a while as this pattern takes time to build and then confirm (nearly four months for BLK).

Twitter stream for 5/17/10 (stocks down on heavy volume, trading near 30-wk): $PCLN, $GMCR, $V, $MA, $TCK, $BUCY, $BTU, $MR

Recent Tweets on BLK:

  • 7:33 PM Apr 6th via web: $BLK – 198.55, clearly falling apart (but gap down has to fill before ultimate slide).
  • 10:02 PM May 5th via web: $BLK…Trading @ 174.80 & going down!

This is a game of odds with developed expectancies so take the trades and follow the rules.

Filed Under: Selling, Shorting, Technical Analysis
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