Sometimes it is a stocks failure to follow through with a pattern or patterns that give us excellent buy and sell signals, many times better than what the confirmed signal would have produced.
Here is a good example of a stock at the make or break point.
First, the stock thrust above the 62% retrace level but reversed and backed off to close below this level. This is the first warning signal, but still not enough to trigger a trade.
Second, you have the wedge breakout marked by the 2 small blue lines that needs to see follow through to the upside. A move back into the wedge would be warning number 2 and this is enough to put on 50% of our short position or put options.
Third and most important is the Inverted Head and Shoulders pattern that broke through the neck line 3 days ago, but has yet to show real signs of strong follow through. A break back below the neck line (Large Blue Line) and we have our clincher trigger for a short sale or put purchase and an increase to 100% of our position.
Keep an eye on this one as it is not that far away from warning number 2.
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