The July 3rd forecast, based on 8 indicators, was down. There were other reasons I thought the stock would decline. There was a “shark” pattern. This is the “W” formation I highlighted on the chart above.
A “W” formation could be a bearish , , , or crab. These formations, when coupled with negative indicators, generally will guide you on the right directional trade. So, what is next if you are short?
Point “B” on the pattern was the trigger for the sell signal. Why? The three indicators on top went negative, as did chop and chop zone (lower indicators). Point “C” on the was a lower low than point “A”, and on the rebound, point “D” was a lower high than point “X”. This pattern signaled a sell signal. The price action of-LRCX became weaker, as the daily action fell into the . Then, as June began, all indicators turned deeply negative. The started feeding to the downside (red arrows), and the stock accelerated down.
So, when would you logically cover a short position?
If you measure a Fibonacci retracement from point “X” ($235.67) to point “C” ($180.07), a logical stop for a short would be a of 1.272 ($164.95) or Fibonacci 1.414) ($157.05). Which one? There is usually an inter-relationship of the indicators that will help you to decide. If the top indicators reverse and start turning positive at a Fibonacci 1.272 or 1.414, a wise person would cover and take profits. The intensity of chop and chop zone would also become weaker.
Previous lows in LRCX-were at $156.75 during the February lows, so logical support (new buying) is here.
Just remember, charts and indicators measure human emotions as well as business conditions. There seems to be a lot of geo-political risk. Don’t be shaken out of your convictions because of the latest shock value of a Washington DC story. Personally, I think the U.S. stock market is very expensive, and risk out-weighs reward.
I hope this has been helpful to you.
I hope all of your trade go well.