Last up is Xerox (XRX) the $10 billion IT and document solutions firm that's achieved household name status. Like Netflix, shares of Xerox have been atrophying over the last year or so, dropping around 8% since the first trading day of 2012. But also like Netflix, this stock is showing traders a setup that could turn the decline around.
The pattern in Xerox is an inverse head and shoulders, a pattern that's formed by three swing lows in a stock's price chart. The outside two, the shoulders, come in at approximately the same level, and they're separated by the head, a lower trough in the pattern. The buy signal comes when the neckline gets broken. While XRX's neckline is sloped, it's positioned at approximately $7.80 right now.
The inverse head and shoulders is a well-known pattern that tends to be a very reliable setup in spite of (or maybe because of) its popularity: a recent academic study conducted by the
Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits
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