Trading Strategy: Breakdown (BD) following failed Buy Setup (BS). FRX has been on an incredible run since its breakout late last year around $50. However, it is showing signs of tiring, with Topping Tails (TT) on the weekly chart, and the daily chart making lower highs, and rolling under its 20-period moving average. Also, note that last week FRX had a perfect Buy Setup (BS) above the 20ma, and it failed. The Buy Setup (BS) triggered and had no follow through. Instead, last Thursday's bar closed with a Topping Tails (TT) and was a bearish engulfing bar, with all of the bulls in the prior bar trapped. Last Friday, it also made a lower low, threatening to break Major Support (MS), and making Thursday's high a lower pivot high from the potential prior "M Formation."

chart courtesy of Mastertrader.com

Tip: A Breakdown (BD) under the 20ma following a failed Buy Setup (BS) suggests a move to the prior demand area.

The Play: Sell short on (1) Gap down, or (2) attempt to rally toward 20MA. Protective stop either (1) above $74 or (2) above $76.

Objective: A move of $1.50 to $4.00 MEDIUM TO HIGH RISK

Play Review:

FRX triggered on rally toward 20MA and made almost $4 in target price.

Bullish 1-2-3 Continuation         Break under 20MA