In previous ‘Charting Stocks For Dummies‘ we have looked at charts that have broken out to the positive side, but this time we are going to look at a stock that we predicted to get rejected by the resistance and could have been shorted.
Remember that these case studies are to show you how effect technical analysis can be at predicting stock price movement.
You can see the below and after charts below…
In the original analysis of Crocs (CROX), we saw that the stock had consolidated under the 50 day moving average (blue line). When the stock initially fell below the line, that should have triggered a sell signal, and now the stock was looking to get back in the buy zone by breaching back over the 50 day moving average; however, the combination of the RSI and MACD in bearish territories just didn’t seem that convincing. So I predicted this stock would get rejected.
In just the next day, the stock got rejected hard and fell nearly 1.5 points. Both the RSI and MACD dipped even lower. While Crocs in itself is a pathetic company, I wouldn’t recommend this has a long-term trade, but if you are a short-term trader, then we now need the stock to break $6.40 before I could contemplate buying.
So there you have it. A combination of simple indicators and patterns allows us to accurately execute trades only when the stock is ready to move. You can check out more patterns, skills, case-studies, and other technical analysis-focused educational material over at Chart Pattern Manifest.