Stock of the day: Zalando

The rise in January was caused by the inverse head and shoulders pattern (yellow), which had been present on the chart since June. At the beginning of the year, a breakout of the neckline (red) occurred, sealing the buy signal. However, the bonanza ended at the beginning of February when the price set its highest levels since the beginning of April, and then collapsed.

The most recent upswing can be graphically displayed as a flag (blue), with the last part of the flag being a false bullish breakout above the neckline (orange). In February, Zalando broke two key supports: the lower line of the flag and the neckline. As long as we are trading below those two levels, we have a legitimate signal to go short. The negative sentiment will be canceled when the price comes back above the neckline, but chances for that are now limited.