Apple Inc (NASDAQ:AAPL), Sunrun Inc (NASDAQ:RUN) and Zoom Video Communications Inc (NASDAQ:ZM) have recently been trading in descending channel patterns on the daily chart, making lower lows and lower highs between two parallel trendlines. The pattern is bearish for the short term but can be bullish down the road.
- For bearish traders, the "trend is your friend" (until it's not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch for a break up from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it's a powerful reversal signal and indicates a rally is likely in the cards.
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The Apple Chart: Apple's stock has been trading within a descending channel since Sept. 24, making consistent lower highs and lower lows on the daily chart. To reverse the trend, Apple will need to break up from the channel and make a higher high above Tuesday's high of $142.24.
The Sunrun Chart: Sunrun has been trading in a steady downtrend between two parallel lines since Sept. 2. Before being able to break up bullishly from the pattern Sunrun will need to regain a support level at the $42 mark.
The Zoom Chart: Zoom has been trading in a falling channel since Sept. 10. On Oct. 1 the stock attempted to break up bullishly from the pattern but created a bearish double top formation near the $275 level and was subsequently pushed back down into the channel. The stock has support below at $244.54, which could act as a spot for a potential bounce.