This is a new discovery. I name it the Angry Bird pattern. Remember years ago when the Angry Bird game by Rovio took the world by storm? Well it seems that we can use it to spot a top in stocks.
If a cup and handle pattern can be used, why can't an Angry Bird be a pattern?
The bottom line is this...
If you ever see the Angry Bird pattern appear in your stock, then you should consider selling it.
The above is a screenshot I got from the Angry Bird website. Well RED is the angriest bird of all according to them. No I'm not talking about Taylor Swift's album but the bird itself.
You know, I read somewhere that some smart vendors took some little chicks and colored them red to sell it to the public. LOL. I digress...
Let me give you a little background about the Angry Bird game. I think most of you will know that the Angry Bird is played using your mobile. You will aim the Angry Bird at a tower to destroy the little green piggies. You want to make the tower collapse.
So, in a way, if you see an Angry Bird appear in your stock, it means that your stock is about to collapse.
I like to play Angry Birds.
When I slide the slingshot I can see the little piggies shiver in fear. So when you see an Angry Bird appear in your stock after a nice run up. Be fearful.
Remember what Warren Buffett said "Be fearful when others are greedy, and greedy when others are fearful".
An Angry Bird is actually a big red bar after a long run up in your stock.
The Angry Bird is just not any ordinary red bar candlestick. It must be big. At least bigger than the normal bars before it. Your stock should also have a nice run up. The big red bar that appears after a nice run up usually hints of a top because buyers could not sustain the stock's rise anymore.
Let's take a look at some examples and you will love the Angry Bird.
The chart above is the daily chart of the Dow Futures. The index had a nice uptrend and had been going up slowly. The candle bodies are small and there is not much volatility. After it run up quite a lot, it suddenly experienced an Angry Bird day. There was bigger volatility and Dow experienced a bigger down day than usual.
That was a warning sign. If that was not enough, the Dow experienced another Angry Bird day. This time it was bigger and fiercer. After the appearance of this nasty Angry Bird, the tower of Dow collapsed.
When you see a big red bar appear after a period of run up, it tells us that either:
There will be some traders or investors who have bought the stock when it was very low and they are taking profits. The best times to take profits on a large position is when it is on the way up. The other reason is everybody who is interested in the stock has bought the stock and there is no more money flowing in to support the stock.
When you have these 2 incidents happen, you will have a big red bar forming in the stock. When you see it, you should be very cautious. Big red bars that appear after a run up usually hints of a top.
2 Angry Birds after a nice run up in ADI also hinted of a top in the stock. Sometimes after a nice run up, small Angry Birds can appear and they can give small hints that the stock is not doing well. You should pay attention to your stock when this happen. The odds are there might be another bigger Angry Bird that will cause a big sell off in the stock.
AMAT had an Angry Bird visiting it in November 2017. Notice how the stock collapsed after that. The next time the stock rose to the prior highs, another Angry Bird appeared and hinted to another drop in AMAT.
Sometimes Angry Birds can be accompanied by other bearish reversal candlestick patterns. This is even a more potent signal for a drop in the stock. In the chart above, you can see how a topping tail appeared in AMGN and then followed by an Angry Bird. If that was not enough warning for you I do not know what else you need.
Sometimes the Angry Bird itself can be part of a bearish pattern. Notice how in the chart above a bearish engulfing pattern appeared? Soon after that, CHTR begin a correction.
How important the bearish signal that the Angry Bird gives depend on how far a stock has run up. The bigger the run up, the more significant the appearance of the Angry Bird will be.
Another thing you need to know is how big is the Angry Bird. A bigger Angry Bird will be more powerful. That is because the range of the trading is bigger. Imagine a 10% movement where the stock started higher but closed 10% lower. This will have a very powerful psychological impact on the investors of this stock.
The chart above is a Malaysian stock that I helped my friends to analyze. Hengyuan had a very bullish run up over the course of 2 months. While it may have been a wonderful ride up that enriched many investors, these kind of parabolic moves are usually not sustainable in the long run.
Therefore, the astute trader or investor should be on the lookout for Angry Birds. If you are about to go out in Kuala Lumpur, you would look at the sky above to see if there are grey clouds. That's because if there are grey clouds it might rain. So you might need to bring an umbrella.
The appearance of a big Angry Bird in Hengyuan actually was the top for the stock. Till now, it still has not been able to climb back higher. If only you had known the Angry Bird. You would have been warned to sell some of your positions in this stock before it collapsed.
While this may seem like a funny way of putting technical analysis lessons to you, nevertheless it is a powerful tool which you can use from now on. Never assume that a nice bull run up will not end. Before it ends, the stock will show you some Angry Birds so that you can run before the stock drops.
Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com
Charts with the investing.com logo are courtesy of Investing.com powered by Trading View
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