NEW YORK (TheStreet) -- Are flips only for pancakes?
Why is this? When the trading range flips, the tendency is for the new border to have greater strength than the previous border. For example, on the chart of AT&T (T), resistance flipped to support and then back again, all within the last six months.
The latest flip occurred right after last week's volatile sessions. While this set up a flip to resistance, the stock price has not recovered from the marketwide price decline. In fact, AT&T remains depressed and several signs point to a bearish trend.
The big decline formed an exceptionally strong bearish engulfing signal. This by itself is not significant except for the size of the second, long black day, which only strengthened the bearish signs.
The relative strength index gave an oversold reading only briefly but has since returned to the middle of the index, indicating that current price levels are "normal" in terms of momentum.
Another big signal was seen in the moving average convergence divergence trend. This moved into bearish territory in a late July crossover, well before last week's debacle. Both averages have remained below the signal line and declined further.
All of these signs point to a bearish trend, at least in the short term.