Broad picture in KLAC shows a potential Head and Shoulder pattern.

A favorite and very simple pattern to grasp is the Head and Shoulder formation.

The KLAC daily chart shows some broad peaks and floors since last December with a high at or near 55 and a low around 42. The pattern I’m focusing on gives us a 44.11 low and 54.12 high. The shoulder line is sloping downward and the neck line has been sliced as support broke today bringing the stops in play and the momentum short sellers get active. Also, notice the RSI is firmly positioned under the 50 mark which is a technical shift from bullish to bearish.  Add the $SPX weakness, headline events and we can see why the stock is in a potential free fall.

In this scenario, the neckline has been breached today which can open the door to a price move to 42 and then 40. Traditional technical analysis tells us that a 3 % move from a support level (neck line ~ 44.00) solidifies the transition from a support break to resistance, lowering the bar for additional selling.

 In the event of a rally from these levels ( KlAC  currently trading at 43.85), a close above 48 will put the bulls back in control.

Update 11_28:

KLAC has bounced off the lows last week with the markets but has hit the resistance level (neck line break) and stalled. A test of 43.15 then 42 ( blue dot) would be exactly what we would want if we were short off the H & S pattern break.

KLAC – LightSpeed Charts

Disclaimer: The material provided is purely for educational purposes only. No information contained herein is a solicitation or offer to buy or sell any securities. The information provided is in no way investment advice from Nick Pirraglia, TradersThinkTank or any other contributed content. The opinions, analysis and commentary on this website are purely the subjective views of the author. Nick Pirraglia is not a Registered Investment Advisor and under no circumstances should any content from this site be used as investment advice, recommendations, or trading advice. Please consult your financial advisor prior to making investment decisions.


About Nickolas Pirraglia

Nick Pirraglia started his career in trading in 1991 after returning to the US as an Army Officer deployed in Iraq. He began as a bond broker and worked his way into trading. Expert mentoring, hard work and a disciplined approach to the markets has allowed Nick the ability to maintain a very successful career in Capital Markets and Trading for over 20 years as a professional OTC Market Maker and independent trader. Nick has also managed the trading desks for a two Dallas based capital management companies and traded equities for a Dallas based hedge fund. Nick has trained and mentored thousands of customers in the rigors of trading, technical analysis and risk controls. Recently, Nick had broadened his market experience through the design and product management of two automated trading platforms. He has the pleasure of working with some of the brightest minds in the trading community and has collaborated with experts in data, design, engineering and trading psychology. An avid long distance runner, Nick completed several marathon events, qualified for the Boston marathon, completed several long distance Triathlons to include finishing a full Ironman triathlon.
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