Deere DE Sets up a Rounded Arc Reversal Breakdown

Mar 27, 2017: 2:16 PM CST

The “Rounded Reversal” Pattern takes a while to set-up on the chart but can produce explosive results.

Let’s see a current example unfolding in Deere & Co (DE) where you can follow in real time:

Deere (DE) appeared consistently on our list of “Strong Stocks Getting Stronger” during the rally from $80 to the current peak near $112.

However, during March, lengthy divergences undercut the rally as price stabilized into a range.

It’s likely we’re seeing a Distribution Arc, or more specifically a “Rounded Reversal” price pattern.

Today’s breakdown beneath the rising 50 day EMA and lower Bollinger Band – especially on a gap – suggests the supply/demand relationship has changed to favor the bears.

With the breakdown, continue focusing on additional movement beneath the 50 day EMA toward lower levels like $100 or even the rising 200 day SMA nearing $94.00 per share.

There’s never a guarantee that any pattern will work out perfectly, so this Rounded Reversal would be considered a failure – and today a Bear Trap – should price react higher (buyers step in aggressively) back above $110.

If you’re trading this, frame your trades in terms of these levels and if not, continue watching how this interesting pattern plays out this time.

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Corey Rosenbloom, CMT

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