Bears Are In Control Of PayPal, Plug Power, Virgin Galactic Stocks: When Will It End?

PayPal Holdings, Inc PYPL, Plug Power, Inc PLUG and Virgin Galactic Holdings, Inc SPCE are all trading higher in strong downtrends. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.

The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods. Traders can use moving averages to help identify an uptrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend and descending longer-term moving averages (such as the 200-day simple moving average) indicating a long-term downtrend.

A stock often signals when the lower low is in by printing a reversal candlestick such as a doji, bullish engulfing or hammer candlestick. Likewise, the lower high could be signaled when a doji, gravestone or dragonfly candlestick is printed. Moreover, the lower lows and lower highs often take place at resistance and support levels.

In a downtrend the "trend is your friend" until it’s not and in a downtrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bearish traders who are already holding a position in a stock can feel confident the downtrend will continue unless the stock makes a higher high. Traders looking to take a position in a stock trading in a downtrend can usually find the safest entry on the lower high.
• Bullish traders can enter the trade on the lower low and exit on the lower high. These traders can also enter when the downtrend breaks and the stock makes a higher high indicating a reversal into an uptrend may be in the cards.
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The PayPal Chart: PayPal has been trading in a consistent downtrend since Oct. 20, making a series of lower highs and lower lows on the daily chart. The stock’s most recent lower low was printed on Dec. 1 at the $179.15 level and the most recent lower high at $197.69 on Dec. 8.

On Friday, PayPal was trading down about 1.7% lower and printing a bearish Marubozu candlestick, which indicates lower prices may come on Monday.

The Plug Power Chart: Plug Power entered into a downtrend on Nov. 22 and has since printed a Dec. 6 low at $31.40 and formed a lower high at the $37.08 mark on Wednesday. Like PayPal, Plug Power was looking to print a bearish Marubozu candlestick on Friday and if the stock falls below the $31 level it will confirm the downtrend with a lower low.

The Virgin Galactic Chart: Virgin Galactic has been unable to buck its long-term downtrend since the stock hit a high of $57.51 on June 25. On Dec. 6, Virgin Galactic hit a 52-week low $13.69 and then bounced up slightly over the following three trading days to print a lower high at $16.56.