The Trending123 Pattern Scan has detected a reversal pattern in Harley-Davidson (HOG) — showing that this motorcycle company may be slowing down after a period of uncertainty or consolidation. HOG has developed a top triangle over the past 39 days. If this pattern is confirmed, then it should result in some intermediate-term price movement (six weeks to nine months).
Click to Enlarge A top triangle shows two converging trendlines as prices reach lower highs and higher (or stable) lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks down below the lower trendline with a noticeable increase in volume, confirming this bearish pattern as a reversal of the prior uptrend.
Technical analysts pay close attention to how long the pattern takes to develop to its apex. The general rule is that prices should break out – clearly penetrate the lower trendline – somewhere between three-quarters and two-thirds of the horizontal width of the formation. The breakout, in other words, should occur well before the pattern reaches the apex of the Triangle or Wedge. The closer the breakout occurs to the apex the less reliable the formation.
You can take advantage of this bearish trend with a short position or with put options.
Target Price: $47.50 – $49.00
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123. Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership.