Working Money: Using Breakdowns by Len Yates
Breakdowns are handy patterns to keep an eye on when you’re trading.
Pattern trading is one of the most interesting ways to trade the markets. And one of the most reliable patterns to trade is a breakdown, which occurs when a stock experiences a swift selloff. Humans have a tendency to trickle into things — as in an entry into a market — but rush out in a stampede — as in an exit from a tumbling market. Sometimes, a news announcement or a rumor is all it takes to trigger a ministampede when the news is perceived to be more significant than it really is. These little (or sometimes large) selloffs can be traded profitably.