“Strong Stocks Keep Getting Stronger while Weak Stocks Keep Getting Weaker.”
Gilead Sciences reminds us of this core trading principle today after breaking powerfully under a key support level with positive divergences, overruling any reversal signal to keep the persistent downtrend in motion.
This stock is nearing a point where it has lost half of its value since mid-2015.
And yes, this weak stock keeps getting weaker. Here’s the Weekly Chart:
As traders we’re always assessing the probability of a trend continuing or reversing.
Retracement or pullback strategies are designed to give us profits from a trend in motion staying in motion.
However, we have to be on guard for reversal signals such as divergences or price achieving a key target level.
Positive divergences set in motion a possible reversal up away from the $70.00 per share support target.
However, buyers failed to rally and reverse this stock higher off the $70.00 level, keeping the big downtrend in motion.
Buyers got trapped with the breakdown as a rapid “stop-loss liquidation” event triggered losses for buyers.
Short-sellers were emboldened, as they have been repeatedly with each retracement higher to the falling 20 week EMA – a core strategy of pro-trend retracement tactics.
Let GILD be an example of how risky it can be to trade AGAINST a strong trend in motion.
Weak Stocks Get Weaker.
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Corey Rosenbloom, CMT
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