The Bearish Rising Wedge Lesson from Virgin America VA

Mar 23, 2016: 11:17 AM CST

What lesson does Virgin America (VA) teach us about the popular “Bearish Rising Wedge” pattern?

Let’s observe and learn:

First, take a look at our educational post “Bearish and Bullish Wedge Patterns.

Second, to see a real-time example taking place, see this morning’s post “The Ross Wedge Pattern.”

Third, compare those examples to what happened at the beginning of 2016 to Virgin America (VA).

Price trended higher but formed the ominous “Bearish Rising Wedge” pattern with negative divergences.

Price can’t remain within the compressing trendlines forever – it has to break one way or the other.

The breakout or range expansion is our trading opportunity forecast by the pattern.

VA shares gapped lower under $36.00 per share, triggering the aggressive breakout opportunity in early 2016.

Price collapsed in a straight-down liquidation swing, generating rapid profits for short-sellers on the way down.

Traders trigger entries when price breaks the lower (rising) trendline, placing a stop either at the midpoint of the pattern ($37.00) or the high of the pattern ($38.50).

The goal is to hold for a movement sharply lower to where the pattern began – in this case it was $29.00 per share.

Within two weeks, price collapsed from $36.00 to $28.50 and then ended with a positive divergence reversal off $27.00 per share.

While this is a quick discussion of the pattern and trading opportunity/outcome, it’s a good example worthy of additional study.

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Corey Rosenbloom, CMT
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One Response to “The Bearish Rising Wedge Lesson from Virgin America VA”

  1. The Ross Wedge Pattern ROST March 23 | Afraid to Blog Says:

    […] Also, study this morning’s educational post on “The Bearish Rising Wedge Lesson from Virgin America.” […]