The Three Phase Trend Trading Lesson from Under Armour UAA
Mon, Jul 31, 2:11 PM ET, by Corey Rosenbloom
Under Armour (UAA) is currently in a Distribution and Mark-Down phase, but how did we get here and why is this stock a textbook example of the Life Cycle of a Stock Movement from Accumulation to Distribution?
Let’s take a look at where we are and how price got here:
The Founding Fathers of Technical Analysis – including Charles Dow, Ralph Elliott, Richard Wyckoff – often discuss how price (in a trend) moves in phases or periods.
The simplest way to describe the progression is to begin in an Accumulation Phase, move into Realization, and then progress through Distribution.
Richard Wyckoff added additional details to the progression and labeled a “Mark-Up” and “Mark-Down” phase during Realization and Distribution.
Nevertheless, this post isn’t meant to describe all three phases in detail, but to show how Under Armour (UAA) moved through these core concepts in ideal fashion.
Note the slow rise during Accumulation (purple) that moved to a bullish breakout and increased “angle of ascent” during Realization/Mark-Up.
From there, negative divergences set in and price BROKE under the rising (steeper) trendline to mark a final transition into Distribution into Mark-Down.
We’re in the Mark-Down phase with price hovering at the $20.00 per share level, a key support pivot that has developed in 2017.
The general plan is to avoid stocks believed to be in Accumulation, focus on buying pullbacks or breakouts of stocks in the rising Realization/Mark-Up phase, and either avoiding – or aggressively short-selling (advanced/experienced traders only) a stock falling in a Distribution period.
Continue studying the three phase life cycle in UAA for additional helpful insights.
Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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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