Shares of Bloom Energy Corporation (NYSE:BE) are trending lower on Wednesday. There is a good chance that the trend continues. An ‘inverted V' reversal pattern has formed on the chart.
Bloom Energy is our Stock of the Day.
Many question the validity of technical analysis. They suggest that it is like astrology or reading tea leaves.
This is understandable. The research and analysis performed by many technical analysts is wrong.
This is because many technical analysts don't understand the basic principles of the analysis. They look for and try to identify patterns on charts without understanding the price action that makes the pattern form.
If understood and applied correctly, technical analysis is the study of supply and demand in a market.
Stocks are always trending. If they are moving higher, the bulls are in control. In a down market, it's the bears. When the leadership changes from one to the other, a ‘reversal pattern' may form on the chart.
If the leadership change is slow and takes place over an extended period of time, a rounded bottom or top may appear. It the leadership changes after a stock fails to break resistance or support and reverses, a double or triple top may form.
Sometimes, the change occurs in just a few days. This could appear as a V bottom, or inverted V top.
As you can see on the chart below, an inverted V reversal has just occurred.
Back in late July, the bulls took control of the stock and drove it higher. The blue rectangles on the chart are up days, and the red candles are down days.
When the bulls are pushing the price up, there will be many blue candles.
Yesterday, it appeared as though the bears were taking control. After moving higher, the bears took over by the end of the day, and the stock closed lower. The leadership changed.
Now that the bears have control of Bloom Energy, they may continue to force it lower.
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Image: Shuttersotck
