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Finding Stabilization After A Big Downtrend

ByFrank Zorrilla
Published 07/11/2013, 07:31 AM
Updated 07/09/2023, 06:31 AM
BIG
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TAMM4
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I’m always on the look out for stocks that are stabilizing or have stabilized for a few days after huge down trends. Technicians will call this pattern bearish flags, which very simply is a bearish pattern that historically has led to lower prices. However since 2009 this pattern for the most part has turned into a bullish pattern. If you follow me on stocktwits or twitter you probably have seen me tweet about stocks that are exhibiting a character change, the last 2 I posted on that topic were RAX 6/21/2013 and SWI on 6/27/2013. These stocks if picked off correctly can lead to a decent short term risk reward trade. I tend to look for the stock to stabilize and get above a moving average that has acted as resistance for a long time, it is normally the 20 day moving average.

Today as I was going through one of my scans I noticed that a few stocks from the region were exhibiting stabilization after deep corrections. I find it very encouraging when I find a cluster of stocks from the same sector or region showing the same pattern similar to what I saw in the Miners NUGT GDX on 6/28/2013.

Some Brazilians stocks are showing this pattern and a few of them had inside days yesterday and also take notice of the string of Doji type days; BSBR PBR.A SID GFA GOL EWZ TAM. Key here is to look for strength before jumping in and use the most recent low as a stop.
BSBR
GFA
PBR
SID
The Brazilian outlier; TAM
TAM
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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