We're seeing the opposite pattern in retail behemoth Wal-Mart (WMT - Get Report) right now. WMT is currently forming a descending triangle, and as the name implies, it's the bearish inverse of an ascending triangle. In this case, we've got a horizontal support level at $68 and downtrending resistance above shares.
The trading signal is exactly the opposite in this stock; Wal-Mart will have to push through its horizontal support level before it triggers a sell signal.
With any technical pattern, it's critical to think in terms of buyers and sellers -- not shapes. After all, triangles, head and shoulders patterns and the like are a good way of describing what's happening on a chart, but they're not the reason why it's tradable. Instead, that all comes down to the supply and demand caused by those buyers and sellers.The horizontal support level at $68 is a place where a glut of buyers has been willing to step in and put a floor in the stock. A breakdown would mean that increasingly eager sellers have absorbed all of the excess demand of shares sitting at that level -- and without that floor in place, shares could fall much further than that. That's why it makes sense to sell WMT on a push through $68.
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