Education & Information
Sell Signals
Bearish Signal Pattern
The bearish signal pattern will occur after a sizable advance in a stock indicated by a long column of Xs. Of course, the Xs represent demand. Eventually, the buying will subside, the supply will meet the demand and the column of Xs will end. In the example above, the long column of Xs ends at $44. When the supply exceeds the demand the chart will change to a column of Os. Above you will see the first column of Os is down to $40. Rarely will a stock advance and then drop straight down. Usually tops take time to form. After the initial move down from the top, demand takes over again and the chart reverses to a column of Xs. If this next column of Xs stops advancing below the previous column of Xs it suggests that demand is losing strength. The stock then reverses back down in to a column of Os. When this column of Os falls below the previous column of Os a bearish signal pattern is formed indicating that a top is potentially in place. This pattern should be treated differently depending on the longer-term trend of the stock. If the stock is trading below the bearish resistance line a bearish signal represents that a short-term advance in the stock is over and the main trend is reemerging. If it happens while the stock is trading above the bullish support line, the bearish signal suggests that the stock’s decline should be stop at the support line.