We looked at DO two weeks ago when we practiced calculating slopes. At that time, DO was coming off Data Point #4 of a Bear Flag/Rising Channel. The Rising Wedge (pattern in blue) targets had MADE, but 61.62 still was IN PLAY from the early May Rising Channel Breakdown.
The recent Bear Flag/Rising Channel resolved to the downside, like the two patterns that preceded it. Notice that the 61.57 target IN PLAY on this breakdown was within five cents of the 61.62 target already IN PLAY from the May 2 breakdown. There never are any guarantees with targets getting MADE, but when more than one pattern breakout or breakdown targets a similar price area, the chances that the target will get MADE, or reasonably approximated, are improved.
The three pattern breakdowns since the initial one, at 73.94 on May 2, provided very good opportunities to sell and/or sell short the stock to avoid losses and/or profit from the selloffs and the recent Smackdown.
This chart of DNDN is yet another example of why I ignore news on the fundamentals, including what CEOs and analysts say about a stock, and LOOK AT THE CHART.
If we're long a stock that is in a nice uptrend with no apparent problems and it gets "shot out of the sky" on bad news, there's nothing can be done about it except sell the breakdown. That's an unavoidable disaster.
The crash in DNDN was an avoidable disaster. UGH.
DNDN broke out to the upside on July 6, on good news about "reimbursement decisions." The upside Fakeout/Breakout turned into a "Knuckle-Biter" when the stock CLOSED back below the breakout, then DNDN went all-ll the way back and retested the bottom of the Symmetrical Triangle on July 18. It stuck the close at 38.22, just a hair above the trendline. Sloppy, but trendline support held and the stock went up to challenge 39.22-39.50 resistance again.
For four sessions, DNDN kept trying to get through that resistance, but without success. I played it on July 22, but threw it in after the stock failed at 39.50 and started selling off.
On July 25, DNDN fell back and CLOSED below the Symmetrical Triangle and on July 27, it CLOSED below the July 18 low. What a nice short that would have been, huh?! That was a technical breakdown, six trading sessions before disaster struck on the bad news about "reimbursement problems." UGH.
Market Lesson: Question the "good stuff" that CEOs, analysts and the media, in general, have to say about a stock when it breaks down, technically. If the news really is that good, why is the stock breaking down? Prior to stocks like DNDN crashing (the Symmetrical Triangle breadown was six days earlier), this old market saw comes in handy:
"First the (bad) chart...then the (bad) news."
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