Finding Stabilization After A Big Downtrend
- Posted by Frank Zorrilla
- on July 11th, 2013
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 simple its a bearish pattern that historically has led to lower prices, however since 2009 this pattern for the most part has turn 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 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 notice that a few stocks from the region that 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.
The Brazilian outlier; $TAM
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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Frank Zorrilla is the founder and chief investment officer of Zor Capital LLC.He began his Wall Street career 10 days after his 20th birthday when he became a Series 7 licensed stock broker. More »
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