Not all of the setups we're looking at today are bullish -- take Pfizer (PFE - Get Report), for instance. The $181 billion pharmaceutical giant looks a whole lot like Vodafone right now; the only problem is that it looks like Vodafone back in October, not now after the bounce off of support.
Pfizer is forming a head and shoulders top, a pattern that indicates exhaustion among buyers -- it's formed by two swing highs that top out at around the same level (the shoulders), that are separated by a higher high (the head). A breakdown below the neckline at $23.50 is the sell (or short) signal for PFE. A closer look at the setup in Pfizer reveals that this stock is showing the same pattern in multiple timeframes -- there's a mini head and shoulders top that forms the head. That sort of a nested pattern is actually pretty common, and it gives traders a pretty good indication of how PFE will react if it breaks its longer-term neckline at $23.50.
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
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