When looking at the following chart, we see the classic "Nice uptrend, puts in a double top, then gets rolled to the downside" bearish pattern.
But what's most interesting is that this same pattern showed itself in many leading stocks a couple of weeks ago. And when leading stocks start to fall, it usually means the rest of the market isn't far behind.
Even when the market was up nicely Monday, most leading stocks were down. This is negative divergence. All the market needed was a catalyst and it got that today courtesy of AAPL and Bank Of America.
Now let's take a look at the charts of some leading stocks:
A nice uptrend, then forms a double top and starts selling off more than two weeks ago.
3 weeks ago, this issue formed a double top as part of a bearish head and shoulders pattern, then sells off. After selling off, attempts to rally back but only up to the bottom of its prior uptrend channel. This is what we call a Kiss Of Death Retracement pattern -- when an issue breaks an uptrend to the downside then comes back to kiss it from underneath only to fall there after.
Same as CRM, starting looking bearish three weeks ago, sold off while the indexes kept going up, then formed a bearish channel as it attempted to recover.
What's interesting to note is that these issues starting selling off aggressively all the while the indexes kept rallying. That's why we say: "It's A Market Of Stocks And Not A Stock Market".
Beforeyou buy the car, you have to look under the hood. The same goes with the market -- all that matters is what leading stocks are telling you.
And success in the market comes from learning the patterns and knowing how to trade them.
The 3 Things You Need To Know
1. Uptrends and how to trade them
2. Downtrends and how to trade them
3. Changes In Trends and how to trade them
A stock can only do 3 things -- go up, go down or do nothing. For us, a company is only as good as its stock and its chart.
So we don't worry about a company's story or what an analyst thinks about it or what we heard about it on TV. All that matters to us is what's happening on its chart. Because that's how you make money in the stock market.
That's it. That's all you need to know to be successful in the market.
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