Is the Stock Market on the Brink? Shocking Bearish Patterns Revealed That Could Cost You Thousands!

The head-and-shoulders pattern is one of the most recognizable indicators in technical analysis, often signaling a bearish trend in stock prices. This classic pattern consists of three peaks: two lower peaks on either side of a higher peak in the center, known as the "head." For the pattern to be confirmed, the price must drop below the "neckline," which is drawn from the lowest points of the two lower peaks. While this formation is more frequently associated with major stocks—often referred to as the “Mag 7” in market discussions—it is increasingly appearing in less-publicized equities, signaling potential shifts in market dynamics.

Investors should pay close attention to five specific companies where this bearish pattern is starting to take shape: CommVault Systems, International Paper, Lucid Group, Mobileye Global, and Moderna.

Analyzing the Patterns

For CommVault Systems, the daily stock chart indicates a clear head-and-shoulders formation. The left shoulder peaked just above $190 in June, followed by a higher peak around $200 in late July, which represents the head. The right shoulder formed with a peak around $198 in September. A significant drop began in October, leading to a price below the April low and confirming the pattern. Moreover, the crossover of the 50-day moving average below the 200-day moving average in early November also reinforces this bearish outlook.

International Paper similarly exhibits the head-and-shoulders structure. The left shoulder was marked by a high near $48 in May, followed by a drop to $44, and then a rally up to $55 for the head. The stock saw a gap down in late July that remains unfilled, with a minor rally in October representing the right shoulder. A drop below the neckline in late October solidified the bearish trend, although the stock has shown slight recovery since early November.

Lucid Group presents another case. The left shoulder appeared at the May high, with the head forming at a higher peak in July. Following a decline to early September lows, the stock rallied modestly to a high just above the downtrending 200-day moving average in October. However, this was followed by a drop below the September low, completing the head-and-shoulders pattern.

Mobileye Global also follows the bearish pattern trajectory. After reaching an April low, it rallied to an early May high and then dropped again before forming a right shoulder in late July. The recent price decline below the neckline confirms the established bearish trend, accentuated by the notable crossover of the 50-day moving average below the 200-day moving average in August.

Finally, Moderna is experiencing a significant downturn. Last week, the biotech firm reached a new low, although it has seen a slight bounce. Yet, the price remains below both the downtrending 50-day and 200-day moving averages. The high in May failed to fill the gap down from April. Additionally, while the July peak did fill that gap, it still could not close above the 200-day moving average. The pattern is completed with lower highs in October and November, followed by a break below the April low.

As these stocks begin to exhibit head-and-shoulders patterns, investors should be cautious. While they may not be household names like the Mag 7, the emergence of this bearish indicator in these less-publicized equities could signal larger trends within particular sectors or the broader market. Keeping a close eye on these formations and associated moving averages can provide valuable insight into potential future price movements.

For those interested in technical analysis, understanding these patterns is crucial. The head-and-shoulders formation, though somewhat complex, can offer significant insight into market sentiment and potential reversal points.