Three White Soldiers
Polaris $PII started this week on my potential short list and almost broke, but since Wednesday it has seem Three White Soldiers come to its defense. Now this snapshot is intraday, so we would have to close near these highs to complete the pattern. If it does complete this pattern becomes a bullish reversal pattern 82% of the time according to Bulkowski’s ThePatternSite:
82% is high, but reading further Bulkowski suggests the performance going forward is a little suspect. These patterns show up after downtrends and can signal that selling pressure has exhausted, but it doesn’t tell you if anyone is really buying or if shorts are just covering. Looking for other clues is something you should always do when vetting a set up. In this pattern one of the main clues would be the volume off the bottom; another one is knowing where important resistance comes in overhead. The $PII chart brings both of these into play. The chart shows that the RSI is in a bull range and plenty of room to move higher after holding well during this pullback. Price never broke down (as I was expecting) and is now reversing higher in a hurry; however, the volume off the lows has been anemic to say the least.
Then we have the down trend line coming into play as we speak. Neither of these are enough to throw out the setup (especially during August), but they do make it more subjective of a trigger. For me to get involved we would have to see the TL broken with an increase in volume next week without seeing a deep retracement of the pattern. Meaning we need to see continuation right away for it to keep my attention based on this particular pattern.
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(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)