Three of the Most Overlooked Technical Patterns
They’re some of the most overlooked trend reversal patterns.
But spot them first, and you could jump well ahead of the pack.
No. 1 – The “Hammer” of Thor
In fact, one of those very reversal patterns popped up on shares of Snap Inc. (SNAP) before the stock ran from $18 to $24 in just days. We’re referring to candlestick patterns. In the case of SNAP, we can take a quick look at what’s known as a hammer candlestick, which when found at bottom of trend, can indicate exhaustion of the bears and likely upside.
Exposing my inner geek for just a moment, it looks like the Hammer of Thor there.
In simple terms, it’s a signal of capitulation among the sellers and an indication of potential trend change. The signal doesn’t always mean that bullish investors have taken control of a stock, but it does mean that sellers are exhausted and buyers are waking back up.
No. 2 – The Death Cross Trader
Very simply put, the death cross occurs when a stock’s short-term moving average (let’s use the 50-day) crosses below its long-term moving average (200-day). It tells us that perhaps it’s time to get out of a stock or market because things could fall apart fast.
For example, take a look at what happened as the 50-day crossed below the 200-day moving average in 2015 and 2016. As the cross was happening, the index pulled back.
Most of the time it serves as a lagging indicator, but it’s still worth paying attention to.
No. 3 – The Golden Cross
Then, of course, we have the golden cross, which is the opposite of the death cross. In this scenario, the short-term moving average (50-day) crosses above the long-term moving average (200-day). Again, it’s a lagging indicator. But it’s also worth paying attention to.
In fact, if you take a look at the same chart above, we’ve highlighted the spot in red where the golden-cross appeared and signaled a potential break higher.
While indicators such as these are often ignored, watch for them. They may just help you get a jump on the rest of the herd.