This is the sort of price pattern I'm looking for as an uptrend begins to show signs of weakness after rallying for sometime and at the start of corrections. Push down, side ways move, then break down on volume. SAFM pushed down from $54.00ish level to $41.00, moved sideways above this level for about two months while the overall markets have been on a tear (relative weakness) and then on Friday broke the $41.00 support level on massive volume. Picture perfect.
All I will be looking for now is a bear flag, bearish pennant or bearish wedge of some sort to get short. SAFM has major support at $36.00 which makes this a natural target to cover a short position. So I will use this target in addition to the entry price and stop loss of the pattern to determine risk/reward and if it greater than 3:1. I will take it. It must be noted, however, that if the markets are still in an up trend at this point (when I get the set up) I will not be aggressive with position size perhaps risking 1% of my account at most. On the other hand if the markets are rolling over or beginning to show clear signs of weakness I will be a bit more aggressive with position size and risk up to 2.5% - 3.0% of account.
Before taking the trade one must note the date of the next earnings announcement. While in the trade if taken one must also consider the possibility of exiting before the target if breadth indicators , market and leading stock price behavior indicate that odds of a significant is very high.
Hope this information was useful.
Good luck with you trading!