The Trend

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.


 

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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.

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