Last up is SemGroup Corp. (SEMG - Get Report), a midstream oil servicer that's showing off one of the more well-known setups out there. SemGroup 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 $35 is the sell (or short) signal for SEMG.
There's a lot of poor anecdotal evidence surrounding patterns, and this particular setup has a lot of detractors because of its name and popularity. But don't fall into the trap of ignoring it just for that.
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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