The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

thE hAnDbook of tEchnicAL AnALySiS

Figure 9.40 A Bear Setup on IYT.
Courtesy of Stockcharts.com

at point E is anticipated. Traders would normally initiate a short position

at either point E or point F, with all stops positioned just above the highest

high of the formation preceding the breakouts. We also see standard bearish

divergence on the MACD and its histogram between points C and D, which

is bearish for the fund. Once price retests TL1 after the breakout, many trad-

ers would have already executed either a full exit or partial scale out of short

positions, with most protective stoplosses rolled down in a defensive move to

lock in earlier profits.

Figure 9.39 Reverse Divergence Seen in the Early Stages of a Bear Setup.