3 Chart Patterns That Suggest Prices Are Headed Lower

Surging stock prices on Monday may have alleviated the anxiety levels of many investors temporarily. However, long-term chart patterns on some of the biggest names in the market are now suggesting that it could be a good time to think more defensively. A significant number of long-term sell signals are starting to pop up across the large-cap segment, which could be a leading indicatorthat we are in the early days of a major downtrend. In this article, we take a look at several patterns in closer detail and try to determine how active traders will look to protect themselves over the months ahead. (For a quick refresher, check out: 3 ETFs for Trading the Spike in Volatility.)

Johnson & Johnson

With businesses spanning healthcare and consumer products, Johnson and Johnson is often used by many fundamental investors as a barometer of the broader financial markets. Taking a look at the chart below, you can see that the price has recently fallen below the combined support of a horizontal trendline and its 200-day moving average. Notice how this level has acted as a key level of resistance in the past. Based on the principles of technical analysis, active traders would expect this type of behavior to continue in the future and will likely protect short positions against a break higher by placing stop-loss orders above $134. Traders will also look to the bearish crossover between the 50-day and 200-day moving averages, shown by the red circle and commonly referred to as the death cross, because it is a common technical signal used to mark the beginning of a long-term downtrend. (For further reading, check out: Support and Resistance Reversals.)

Long-term sell signals on the charts of some larger players suggest that the broader markets could be prepping for a major move lower. …read more

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Category: JNJ, XOM, KO

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