Last year brought out some strong performance in the financial sector, but the tides could be turning in 2014 for Canadian banking giant Toronto-Dominion Bank (TD). This $84 billion name is starting to look toppy right now.
The pattern to watch in TD is a "double top." Like the name suggests, the setup is formed by two swing highs that lose steam at approximately the same level. The sell signal comes on a move through support at $88.
Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Double tops, triangles and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.
That support level at $88 is a price where there has been an excess of demand of shares; in other words, it's a place where buyers are more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes a breakdown below $88 so significant -- the move would indicate that sellers are finally strong enough to absorb all of the excess demand at that price level. Wait for that indication before you sell.