Bearish Chart Patterns

Bearish chart patterns are those that are recognized as potentially leading to a decrease in price of the stock. One trades bearish chart patterns by 'shorting' the stock. A 'short' trading or investing position is one where you borrow shares from your broker and sell shares in the expectation that you will buy them back ('cover' them) in the future at a lower price, thereby making a profit. We have developed algorithms for two watchlists based on chart patterns that are recognized as providing excellent short trade signals when stocks break down from these chart patterns. These links describe our implementation of the pattern and hints on how to trade them.

Head and Shoulders Top
The head and shoulders top pattern (HST) is recognized as one of the most reliable bearish continuation patterns. Our data for over 3,000 HST patterns shows that it is successful 73% of the time and reaches its target price 59% of the time.

Pattern Description
Trading Hints
50 DMA breakdown
This pattern looks for stocks that are testing support at the 50 day maving average level. The algorithm is based on guidelines offered in "How to Make Money Selling Stocks Short" by William O'Neil with Gil Morales, with additional requirements and constraints of our own.

Pattern Description
Trading Hints