Markets sold off on heavy volume across the board yesterday. Stops can be trailed lower for many short positions that were initiated over the past month in names such as The Goldman Sachs Group, Inc. (GS) and Autoliv, Inc. (ALV). Below is a short set-up in P.F. Chang’s China Bistro (PFCB), that may trigger soon.
Many of the short ideas I put out over the last month have had the same or similar distribution patterns: a head and shoulders pattern (H & S) or complex H & S. These chart patterns are currently present in many names and once triggered are of the most reliable reversal patterns.
Chart 1: PFCB – The comparative relative strength of PFCB versus SPY broke below major support in January. This may be an early warning to the potential breakdown in the price.
Chart 2: PFCB: The daily chart below illustrates a break of the primary uptrend line, circled, which signaled a major change of the trend. Over the past two weeks the price has retested the trendline from below and it provided resistance.
Yesterday the price closed below the 200-day sma and may be close to triggering a bearish complex H & S pattern. The pattern began developing in September 2010. Trigger: Confirmed break of the neckline, just above $45, Target: Price objective is $37.50 measured by the height of the pattern. Protective Stops: Confirmed move back above the neckline and/or a daily close above $48.
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Disclaimer: The information contained herein is not guaranteed. This is not a solicitation of any order to buy or sell. This material is based upon information that I consider to be reliable, but I do not guarantee its completeness or accuracy. Assumptions, opinions and recommendations contained herein are subject to change without notice, and I am not obligated to update the information contained herein. I have positions in SPY, ALV and GS, This communication, including any attachments, is for the exclusive use of the intended recipient(s) and/or the intended recipient’s designees. Any use, retention or dissemination by a person other than the intended recipient is strictly prohibited. If you are not the intended recipient or designee, please notify the sender immediately by return e-mail and delete/destroy all copies of this communication.