On Friday, Bollinger Bands provided technical traders with a clue that the recent uptrend was losing momentum, making Resmed stock one to watch.
The upper Bollinger Band is a measure of standard deviation. It’s a statistical measure of the variance from a mean (in this case the 20 day moving average). Strong uptrends typically have a lot of candles crawling along the upper band and poking through it.
On Friday, Resmed stock made a trend peak that completed a double top or “M” style pattern. The first peak was above the upper band, indicating strong momentum. Friday’s peak was below the upper band indicating that momentum was fading. This loss of momentum often precedes either a period of sideways drift or a trend reversal
Yesterday’s sharp move lower and gap below the 20 day moving average is making this look like a trend reversal. One upcoming clue for technical traders may be whether or not price rallies to fill this gap in the near future. Failure to do so would be a sign of weakness suggesting this is a “break away” gap. In that case the 200 day moving average may provide a potential support zone.