Bull Flag vs. Disaster Sell Signal

• Posted by Robert Sinn
• on July 26th, 2011

Patriot Coal ($PCX) caught my eye over the weekend as a good looking buy setup. They reported earnings this morning and as a general rule I don’t take trading positions into earnings. After today’s 13%+ shellacking I am very glad I was not long heading into the earnings report.

 

As @Xiphos_Trading tweeted this morning, “Patriot Coal blows a good setup”. The large gap lower accompanied with the printing of a high volume large bodied red candle which cut through all the key daily moving averages places today’s action into the disaster sell signal category. Simply put, PCX needs time to heal. The market is disappointed that PCX has been unable to execute despite strong pricing for coal. PCX is now a “show me” story in the eyes of investors.

 

Once the brief attempt to lift back above 23.00 failed, PCX was in the hands of the bears for the remainder of the session. Notice how heavy the offer was throughout the day, every bounce found eager sellers. Needless to say, this is not how you want a stock to act unless you are short!

 

$AMZN completed what appears (stock is trading north of $226 as I press publish) to have been a textbook bullish flag over the past three weeks. After a strong rally from mid-June into early July, AMZN went into a three week consolidation between 210-220 which worked off some overbought indicator readings. This was very healthy action and exactly what you want to see if you are long the stock.

 

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus