DPZ's failure to confirm came when it opened below the upper 20-day price-channel boundary, $59. A move above that level today would count as confirmation, but at this point seems unlikely.
AEE fails because of my preference for trading with the trend. The stock has been in an extended uptrend for years, with the most recent leg having begun from $28.17 in early June 2012.
The bear signal came on the 14th day of a correction of the $36.74 swing high that has established a very near term downtrend (low-lower high-lower low) on the daily chart.
That's not very persuasive for the bear case. A drop below $34.26 would buttress the bearish case on the daily chart, but on the weekly chart, which is my principal vehicle for judging trends, it would take a decline below that early June level to begin to establish a downtrend.
AEE has sufficient liquidity for a short sale of shares, and also a selection of options with four-figure open interest. However, the distribution of open interest makes it impossible to hedge the position via a liquid options credit spread. Given the contradiction between the signal and the trend, I would want to have a hedged position.
References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
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