Happy Tuesday! For Day Two of our Five Stocks In Five Days Segment I want to focus on a different type of setup. Market technicians are often heard talking about two types of overall patterns: Continuation and Reversal. Yesterday’s CVSI was a continuation pattern. In short, price traded or discovered higher, consolidated while digesting gains, and resumed trading upward in the direction of the overall trend. Today we are going to look at what I think is a reversal pattern.
STOCK #2: SONO
Sonos, the company whose mission it is to design wireless multi-room audio has recently broken higher above its downtrend. Since its IPO last summer, the stock has been in a defined downtrend making a series of lower highs and lower lows. However, most recently we can see that the stock put in a very likely double bottom, the first which came toward the end of 2018 and the second earlier this month. Since making this double bottom, price has bounced above the downtrend line which had previously acted as resistance. As the stock has closed above this downtrend now for a number of days, we can look for prior resistance to become support. Also notice the high volume node we are working with.
In sum, we have defined support via a double bottom, high volume node and prior downtrend line below, and clear skies above. For those reasons I took SONO stock for my own account for a longer term hold.
Back with stock 3/5 tomorrow!
Trent J. Smalley, CMT