Gaps and Traps with Breaks and Fakes for ISRG

Apr 9, 2014: 2:30 PM CST

Intuitive Surgical (ISRG) is the weakest performing stock today (largest percentage loser) in the S&P 500 which prompted me to investigate more about this stock and its chart.

A quick glance at the Daily Chart shows a “Break and Fake-out” situation along with a sudden reversal back to the breakout price.

Intuitive Surgical ISRG Breakout and Bull Trap Fake Reversal

April 1st triggered an opening gap breakout that would later devolve into a cruel April Fool’s joke with today’s larger gap-down being the punchline.

After three days of strong, impulsive price action away from the rectangle value area (highlighted), price reversed just as sharply to return back inside the pattern.

Let’s step inside the breakout and reversal to learn a quick lesson in real-time price monitoring:

ISRG Intraday Divergence Reversal Trap

The April 1st gap-up into the $500 per share level was met with a standard retracement and recovery play.

The next session saw an additional upside breakout above the $500 per share “round number” reference area that continued into the next trading day (April 3rd).

However, the closing price on April 3rd was the swing high ahead of a violent reversal and current collapse.

Note the quadruple swing (four price point) negative divergence as highlighted in both Volume and the 3/10 Momentum Oscillator (or any similar momentum oscillator).

Take a look at my earlier reference post with respect to broader Market Internals and reversal situations along with the earlier S&P 500 post that detailed the “vacant march to new highs” ahead of the reversal.

Apply the same logic to the current intraday and now daily chart of Intuitive Surgical (ISRG).

Ultimately, the re-break back under the $500 reference area triggered profit-taking from the bulls/buyers along with financial losses (stop-losses) from short-term buyers above the $500 level.

The result was a return back to “Value” and the current situation which calls either for a bounce up off the current $450 breakout level… or a failure to bounce which likely results in a retest of the lower trendline near $420 per share.

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Corey Rosenbloom, CMT
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7 Comments

7 Responses to “Gaps and Traps with Breaks and Fakes for ISRG”

  1. April 11 Breakdown Sector Breadth and Trending Update | Afraid to Trade.com Blog Says:

    […] Jacobs Engineering (JEC) and a stock I highlighted on Wednesday – Intuitive Surgical (“Gaps and Traps with Breaks and Fakes for ISRG“) top our downtrending […]

  2. April 11 Breakdown Sector Breadth and Trending Update — Trading Your Own Way Says:

    […] (TDC), Jacobs Engineering (JEC) and a stock I highlighted on Wednesday – Intuitive Surgical (“Gaps and Traps with Breaks and Fakes for ISRG“) top our downtrending […]

  3. Bullish Sector Breadth with Caution and Trending Stock Scan for April 14 — Trading Your Own Way Says:

    […] Corp (CCL), Pitney Boles (PBI), Intuitive Surgical (ISRG which also reappears, as I covered in an earlier educational blog post), and Bristol-Myers Squibb […]

  4. Tax Day Bearish Sector Breadth and Stock Scan | Afraid to Trade.com Blog Says:

    […] continue to see an appearance by Intuitive Surgical (ISRG) which I highlighted on a “trap and gap” educational post last week.  The trap triggered and price continued to collapse […]

  5. Tax Day Bearish Sector Breadth and Stock Scan — Trading Your Own Way Says:

    […] continue to see an appearance by Intuitive Surgical (ISRG) which I highlighted on a “trap and gap” educational post last week.  The trap triggered and price continued to collapse […]

  6. April 23 Sector Breadth and Intraday Trading Update | Afraid to Trade.com Blog Says:

    […] a look at my prior educational update “Gaps and Traps in Intuitive Surgical ISRG” which provides additional […]

  7. April 23 Sector Breadth and Intraday Trading Update — Trading Your Own Way Says:

    […] a look at my prior educational update “Gaps and Traps in Intuitive Surgical ISRG” which provides additional […]