First Thrust Down Chart Pattern
Today we are going to look at several charts that are displaying the same pattern. Namely the “1st Thrust Down” pattern. This is a change in trend pattern (from Bull to Bear). There has been several of these patterns spotted recently and this is an indication of what the market as a whole might have in store for the near future. Lord knows the market can’t always go straight up.
Take a look at this first chart (courtesy of All About Trends, and used with permission) of Rovi Corp towards the end of Feb 2011. The notes on the chart are pretty self explanatory – but notice also the RSI during the ‘snap back rally’ doesn’t really climb. This was another signal that perhaps the bounce off the 50 day MA was not going to be sustained.
Now take a look at this second chart of Allegiant Travel Co. from the same time period. Once again during the snap back rally the RSI never breached 70 and was once again another signal of a change in trend from up to down.
Here is the third chart showing a ’1st Thrust Down’ pattern. This is Silicon Laboratories on Feb 23rd.
Lastly here is a look at VMWare from March 2nd. Notice the now familiar first thrust down, snap back rally (but fails to go to a new high and RSI hovers in the middle) then bombs away. When the stock breaks the snap back rally trend channel that is your sell signal (or you can buy puts for those who like to play options).
This chart also shows where the bomb dropped so to speak. Notice that the bounce occurred in the neighbourhood of the 200 day MA, and signals that it might now (or soon anyways) be a good time to go long. Naturally you will want confirmation from the S&P500 charts and Dow charts so that all are moving in the same direction, before making your purchase.