As markets are beginning to look more and more fragile with seemingly less sectors participating one should be on the look out for bearish formations. One we will take a look at here is the bearish descending triangle. The pattern occurs with a series of lower highs and a horizontal line of support at the bottom. Once that line is taken out short positions can be initiated. With all breaks higher and lower it is not uncommon for the pivots to be retested to see if they are valid. Below are 2 examples of just that happening, and exactly how they were written up in our daily report.
In Wednesdays 7/29 Game Plan we looked at DV. The stock broke below the triangle originally on 8/6 and went onto retest the trigger almost precisely on 10/9 before heading back lower again. It is now 20% under the suggested trigger and this week alone has slumped almost 12% in 2 days. DV now sits 52% off recent 52 week highs and has lost ground 23 of 43 weeks in ’15.
Stocks to consider as shorting opportunities are DV. DV is an education play down 36% YTD and 24% over the last one year period and sports a dividend yield of 1.2%. It has produced 4 consecutive negative earnings reactions down 18.3, 18.1, .2 and 2.4% on 4/24, 2/6, 10/24 and 8/8. Volume trends are poor with 5 weeks of distribution against one week of accumulation in ’15 (recent weeks ending 6/26-7-3 fell more than 11% in active trade). The stock has formed a bearish descending triangle that aligns with the round 30 handle, with one CLOSE below on 6/30 of 29.98. Sell stop to short DV below triangle at 29.70.