One of the best chart patterns to spot a major downside move in a stock before it happens, is when there is a wide range reversal bar from a high. For example, take a look at the chart below of International Business Machines (NYSE:IBM). This is a weekly chart of the stock which shows a major decline in April 2013. Notice the wide range sell-off bar that was very close to the high. At the time of the decline, IBM
stock was trading around $212.00 a share, by the time that red bar closed the stock was trading around $190.00 a share. Now that is a wide range sell-off bar from a high and it will usually always indicate lower prices ahead for the stock. As you can see, over the next six months the stock declined as low as $173.00 a share before being defended by the institutional money. Take a look at other charts where a stock sold off sharply from the highs and you will see that it was often an indication that the stock was going to decline further in the near term future.