GROUP STRENGTH
Look at sector behavior for signs of direction via sympathy or coattail moves as big money rotates into new groups during shopping sprees.
Rarely does a stock move contrary to its sector peers. The prevailing group's strength or weakness will eventually be mirrored by the individual stock.
Bottoms-Up Pattern
When evaluating strategic set-ups, look for technical factors that induced weakness and pulled a large number of shorts into play—for example, a double top that broke down and sliced through the trough, dropping to meet the objective low. Many are so hungry to devour a weak stock that they fail to realize it has given up all the value that it technically is willing to and is now ready to consolidate and reverse. By the time that pivot point is reached, a sharp reversal ensues, and the squeeze is on.
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