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5 Technical Setups for a Market Selloff


Despite the recent selling in stocks, 2011 has been a strong year for shares of French pharmaceutical firm Sanofi (SNY - Get Report). Shares of the $100 billion firm have climbed more than 19% since the first trading day of January -- and it looks like they could have further to run.

That's because shares of Sanofi are forming an inverse head-and-shoulder setup, a well-known pattern that indicates exhaustion among sellers. On a head-and-shoulder (either inverse or regular), the breakout signal comes when shares punch through the pattern's neckline. At that point, the balance between supply and demand for shares of Sanofi favors buyers.

Don't put too much emphasis on the numerous gaps in Sanofi's price action. These gaps, known as suspension gaps, occur because this stock trades in Europe outside of normal trading hours here in the U.S. They're not relevant to the setup -- only the neckline is.

Sanofi, on of the highest-yielding drug stocks, shows up in the portfolio of Warren Buffett as of the most recently reported period.
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