STOCK GOODIES PLAYS OF THE WEEK

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P&F Bearish Catapult

A Bearish Catapult forms with an initial breakdown, a short bounce and a second breakdown. While the ideal Bearish Catapult starts with a Triple Bottom Breakdown, Quadruple Bottom Breakdowns or Multiple Bottom Breakdowns are also possible. After the initial Triple Bottom Breakdown, prices reverse and move back into the pattern. The initial breakdown or support break is usually just 1-3 boxes. Prices move low enough to break support and there is not much downside after the initial breakdown. A 3-box reversal then forms and a new X-Column advances back into the Triple Bottom pattern. This is a weak bounce because the X-Column does not break below the high of the pattern or forge a Double Bottom Breakout. Prices then turn back down with a new O-Column that exceeds the prior O-Column to complete the catapult (Double Bottom Breakdown). The bounce back into the pattern shows the bulls giving it one more go. However, the bounce is weak and the second breakdown puts the bears in full control.



The chart above shows FedEx (FDX) with a Bearish Catapult consisting of a Triple Top Breakdown and a Double Bottom Breakdown. Because the pattern includes the high at 97, it would be considered a reversal pattern. Notice that the bounce carried all the way to the prior high (X-Column), but did not exceed it to negate the pattern.



The chart above shows Unum Group (UNM) with a classic Bearish Catapult. This would be considered a bearish continuation pattern because the breakdowns occurred after a couple of Double Bottom Breakdowns and the high formed just before this pattern.