The bullish inverse head and shoulders pattern normally works best after a downtrend but this pattern occurred with a couple of leaders near fresh 52 week highs. It is the exact opposite of the bearish head and shoulders pattern and each could lead to strong moves. Below are two examples, a breakout with FB and a retest of the breakout with O, that were highlighted in our Wednesday 10/14 Game Plan and the Tuesday 10/13 Game Plan. FB has had a nice run moving past the very round par number for the first time last Friday. It REPORTS earnings next Wednesday after the close.
FB is on pace for a 4th consecutive weekly gain with the last 2 higher in the neighborhood of nearly 5%. The last 5 sessions have all bullishly CLOSED at the top of the daily range and one could probably be wise to wait for a pullback toward the round number and a retest of the cup base trigger of 99.34. Below is precisely how the stock was profiled in our 10/14 Game Plan.
Stocks that can be bought as they take out bullish inverse head and shoulders patterns are FB. FB is a tech gorilla higher by 21% YTD and 29% over the last one year period. Earnings have been on the soft side and despite all that it is just 5% off all time highs. It fell 1.8, 2.6 and 6.1% on 7/30, 4/23 (bearish engulfing candle that session) and 10/29. FB gained 2.3% on 1/29. The stocks progress was halted near the round par number on 7/21 and it is lower 2 of the last 3 weeks, but a closer look reveals the week ending 10/2 rallied 8% off intraweek lows to CLOSE at top of weekly range. It has now formed a bullish inverse head and shoulders pattern at enter with a buy stop above 96.