A Bearish Breakdown Busts the Bullish Reversal in KORS
Wed, May 31, 1:11 PM ET, by Corey Rosenbloom
Bulls (buyers) stepped into a Trap last week as Michael Kors (KORS) broke down from support.
Here’s the Trap and a longer-term perspective on how far this once strong stock has fallen:
$36.00 per share looked like a promising support level complete with positive divergences.
A breakout above the $38.00 level – the falling 50 day EMA – was a potential (aggressive) bullish breakout and trend reversal entry.
However, price collapsed quickly back under the 20 and 50 day EMAs, triggering stops and setting up something more ominous.
A multi-day sell-swing took price to new lows and the recent rally to $38.00 again set up another short-sell trade.
We see the gap-down on earnings completing this bearish trade, validating the Bull Trap, and collapsing price to new multi-year lows on high volume.
Here’s the Weekly Chart to give us the perspective of what went wrong and what it means now:
The last time KORS was at the $32.00 level was in early 2012 – five years ago.
Note how important the $34.00 per share was as a critical support/bullish reversal level.
Today history did not repeat and instead shares slid to new lows, continuing the downtrend in motion.
Trends – once established – have greater odds of continuing rather than reversing.
That’s the core principle at work as the distribution – and downtrend continues – for KORS.
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Corey Rosenbloom, CMT
Afraid to Trade.com
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Corey's book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).”
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