At All About Trends we try to break down the market into the most basic reality concepts in order to keep it simple for you. A basic tenant of our style is that of there are only three things a stock or index can do.

Up

Down

Sideways

That being said there are only three things you need to know.

Up-trends and how to trade them

Downtrends and how to trade them

Change in trends and how to identify them

In our most recent newsletter I talked about spending more time on change in trend patterns and topping patterns.

Whether you short sell or not you need to know these patterns! If you are long only they are patterns that let you know you probably need to get out. In that case for those its the "What to Watch Out For".

For those that are opportunists regardless of what the market is doing these are short sell patterns, for those its the "What To Watch For". So you see it makes no difference who you are and who you choose to be you need to know these patterns.

Given a lot of names have already fallen let's talk about what I call First Thrust Down pattern today.

There is a good possibility that what we've just seen is the first shot across the bow. It's what happens during all rallies from here on out. If you are on the lookout for high quality short sell patterns over the coming weeks then this will be of major importance to you as they ought to lead the way for profits on the short side of the market.

That said, the First Thrust Down pattern is the ideal short-sell pattern to be aware of to profit in issues that show this pattern.

First Thrusts Down
This is when an issue is in a clearly defined uptrend that all of a sudden falls to either a prior support level ,the 50 day average or even a full blown break of the overall uptrend (The Blue Box is the first thrust down). Then there comes a time when it proceeds to make a rally attempt (Everything above the pink line). We call that rally attempt a Snapback rally too by the way. Upon a break of the pink line it's what we like to call bombs away. That trendline break is your short-sell trade trigger.

For a chart that does a good job of explaining the component's of a first thrust pattern look at one of my all time favorite hall of fame charts

Keep in mind this pattern shows up in multiple time frames and frequencies. Some build out for a weeks, others for sometimes a few months with PBR that snapback rally in pink lasted about two weeks.

What I also want you to notice is that of a bigger pattern that also built itself out in addition to the First thrust Down. See it? No? Take a look at the same chart below again.

Below is another one that built out the pattern over a period of a few weeks.

And yet another example from my hall of fame file.

What I really like about this chart is that it does a good job of showing a nice clearly defined uptrend channel in Green and above the 50 day. Then there comes a time when an early warning alert system pattern starts to build itself out in the form of a Double Top in red. Double tops for us fall into the category of a "Change In Trend" pattern, in this case from up to down. After all if you are long at a top you need to know when to get out right?

The bottom line is this, the Double Top pattern alerts you to the possibility of a change in trend MAY be about to occur so keep a close eye on any particular issue sporting that pattern.

Now lets take a look at an index chart

Speaking of double tops take a look at the end of the snapback rally B wave. See anything? Plain as day the two red lines are what I'm talking about.

Putting It All together

Now lets put it all together as its all about knowing the components of chart patterns. Take a look at a recent darling below.

After completing the double top see what this issue did? Its broke to the downside

Now lets take it one step further because patterns show up within patterns.

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Now lets take a look at some names that MAY be setting up a First thrust down pattern that have staged the initial first shot across the bow per se.

Should these names continue to build out the snapback rally patterns then we'll add them to the short side watch list.

So in summary, when you see names that have rolled over in a First Thrust Down (Blue box) wait for the snapback rally before shorting because shorting at the bottom of the blue box is shorting AFTER the fact. The phrase that comes to mind is? Chasing a bus.

By the same token, if you are long and want to stop the emotional pain of being hit over the head when a stock you own took it on the chin in the form of a blue box First Thrust? Here too wait for the bounce as more often than not about the time you want to stop out it isn't but a bit longer out in time that the stock tends to rally. Getting out at those lows is the fastest way to see the stock take off, only problem is? It typically does so without you.

Folks, its all about the snapback rally in more ways than one. For getting out of an issue you are down in and for getting into the issue on the short side.

PULLBACK OFF LOWS

This pattern goes hand in hand with the first thrust down pattern. In each of the charts above you can see the Pullback Off Lows (POL) pattern present.

In the case of First thrust down patterns, Pullback Off Lows (POL) can be considered a trend pattern within a bigger trend. We wont get in too deep today with POL patterns except to say that they are present in all the charts above, we'll save a detailed analysis of the Pullback Off Lows pattern for another time.

In closing it is my hope I've been able to enlighten all of you by passing along a little knowledge all in our quest to help YOU be all that you can be. This week we'll be adding a slew of names sporting snapback rallies as they show up they will be added to the short side watch list. I have a LOT of names folks. More than we will ever be able to do that much I can tell you. Your humble servant Harlan Pyan