A very similar setup is forming in shares of heavy equipment maker Caterpillar (CAT - Get Report). Like Goldman, CAT has been forming a head and shoulders pattern, in this case at the end of the stock's downtrend. While that's not the normal price action that we'd expect to see before a head and shoulders setup (it's a "topping" pattern, after all), the trading implications are still the same.
The sell signal comes on a breakdown below the neckline.
The head and shoulders may be a popular pattern, but the research shows that it's still a valid one: 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
Twitter and become a fan on Facebook.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts