Here is a trade analysis of Gilead (GILD) . If you want to see what we’re doing in the member section of SMM, then check it out today — it’s a free 30-day trial. (April 08, 2014)

After two big down days in the market we’re getting kind of a predictable rally. How far up that goes I don’t really know, but it was just really unlikely that we were going to get three days selling in a row. So just keep that in mind when you’re looking at prices in the future, it’s just very rare that you get three big down days.

I want to talk about Gilead ( NASDAQ:GILD ) because the stock has clearly broken an uptrend, you can see it here. I was talking about Goldman Sachs ( NYSE:GS ) the other night, a lot of times the first indication of a trend break is not the break, it’s the fact that the high does not go up to reconfirm the trendline. So even though it’s a higher high relative to this one, maybe just barely, maybe about the same, but even if it was a little bit higher if it doesn’t confirm this trend line then what it reflects is a stock that’s losing momentum. If the trend has been up long enough you’ve got to look at it and say, “Okay, well this puppies been going up so long it doesn’t surprise me that it’s losing momentum.” So then you set your trailing stops or you start to liquidate a little bit, wait for the trend to break and then to liquidate the rest and you’re out of this really nice trade right around here.

Well now, if you’re still holding the stock, it’s bouncing for the second time off the 200-day moving average, but this first time didn’t lead to much of a rally, it didn’t even come up and test this prior support line, which a lot of times you look for; frankly you look for those to roll over and then that’s your shorting opportunity. Here though, it was such a weak bounce, now we’re back to test it, so here’s really, in my view, the trade. If it falls below this level I don’t really think that’s a short, because it’s already fallen so far it’s bound to bounce up somewhere around here. Instead, what I think you do is hope, not a method but often used, hope to get a weak bounce here, and then you get off the short on a lower high relative to this one. Now you’re drawing a trendline this way, you short the stock here, anticipate the move below the 200-day moving average and that’s your trade.