Friday, July 26, 2013

The blow off top in Tyler Technologies

I intend to publish my theory of trading blow off tops (aka bubbles) in a number of small lessons. But before I get started with that I'm going to jump right in with a current chart where this pattern is happening right now.

(Due to traveling these screenshots are not edited)

The above chart is close to ideal because it is 1, Exponential and 2, Smooth (Not many jagged areas that can act as resistance.) The ticker symbol is TYL. But let's look closer at recent action:

Yesterday had high valume and a large price swing. (As can happen on tops) Three days ago the latest trendline got broken.Yesterday the trendline was reached from below. That means (in technical analysis theory) that the trendline that was giving support is now acting as resistance.

The idealness of the long term blow off pattern, breakdown of the latest trendline and the touching of the resistance line makes this stock a high probablity short opportunity. High probability trades should be played aggressively.

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