Today we've chosen to take a look at Stanley Works
) because we've identified a well-formed head-and-shoulders
pattern. As you many of you know, this chart pattern is used by technical traders to suggest that the uptrend is setting up for a reversal. Notice how the level of support near $53, also known as a neckline
, has propped up the price of the stock in the past. Traders will watch for a move below this support to be combined with an increase in volume to signal a sharp move toward our target of $46.25.