Not all of the setups we're looking at today are bullish -- take Pfizer (PFE), 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
Twitter and become a fan on Facebook.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
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
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV