As you read more of these articles and watch more trade breakdowns, you may begin to see some reoccurring themes. In this case, it’s a reoccurring pattern and one we have seen several times across a handful of different stocks. Seeing patterns over and over again helps in two ways:

1. It familiarizes you with commonly traded patterns
2. Gives you the confidence to act the pattern when you see it

Northrop Grumman (NOC) has formed a pattern that we have seen a couple times recently, a head and shoulders pattern, which implies a reversal from up trend to down. A break of the neckline, currently sitting just above 460, would confirm the pattern. It is important to wait for the confirmation because we don’t yet know if this pattern will fully form. If it doesn’t break the neckline and it actually reverses in the opposite direction, then it isn’t much of a head and shoulders anymore, is it?

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