In yesterday’s analysis I gave you a plan for approaching the markets as the SPY breaks or bounces off of its 200-day moving average.
I also explained how you could profit from a move down by buying the VXXB.
Here’s another strategy to profit from the decline. This stock has two massively bearish patterns.
United Continental Hldgs (UAL) is also breaking its 200-day moving average, but it also has a massive head and shoulders pattern!
I’ve illustrated the pattern on the chart below.
The technical breakdown point in a head and shoulders pattern is the line that connects the lows as I’ve illustrated, but I would not wait for the that level to break.
The idea here is that if the SPY breaks its 200-day, and UAL breaks its 200-day average by trading under yesterday’s low of $81.95, then the bearish momentum will lead to break below $79 which is the pattern’s sell point.
There are two levels that could be used as a stop after a short sell entry under $81.90.
Once the entry level is hit, UAL should not trade over its 200-day average or yesterday’s high, so the tight stop is over $84.50.
A wider stop that would include the consolidation prior to the 200-day break and the 50-day average would be over $86.
Even if the SPY does not breakdown easily, UAL’s bearish pattern could very well head lower without the help of a weak market.
Look to take some profits at the $75 and $72 levels.
Rick Nartarian, Chief Investment Officer
The American Investor Daily