Arch Capital Group Ltd. (NASDAQ: ACGL)

Arch Capital Group Ltd., through its subsidiaries, provides insurance and reinsurance solutions worldwide. It operates in two segments, Insurance and Reinsurance. The Insurance segment offers primary and excess casualty insurance coverage, including railroad and middle market energy business, as well as to middle and large accounts in the construction industry; directors and officers’ liability insurance; medical professional and general liability insurance; collateral protection, debt cancellation, and service contract reimbursement products; loss sensitive primary casualty insurance programs; professional liability; general liability, commercial automobile, inland marine, and property insurance to program managers; property, energy, marine, and aviation; surety; and travel and accident insurance products. This segment markets its products through a group of licensed independent retail and wholesale brokers. The Reinsurance segment reinsures third party liability and workers compensation exposures; individual property risks of a ceding company; and catastrophic perils on a treaty basis.

To review a current H&S pattern on Arch’s stock, please take a look at the 1-year chart of ACGL (Arch Capital Group, Ltd.) below with my added notations:

1-year chart of ACGL (Arch Capital Group, Ltd.)

ACGL had been on a steady, yearlong rally until peaking in May. Over the last (3) months the stock had created a very important level at $51 (red), which was also the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (navy). Confirmation of the H&S occurred when ACGL broke its $51 “neckline” support. So, the stock should be moving lower overall from here.

Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $51 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $51 level.

The Tale of the Tape: After embarking on a nice uptrend, ACGL confirmed a head & shoulders pattern. A short trade could be placed now, or could be entered on any rallies up to or near the $51 area.

Would you like assistance in making your TBS trades? If so, email me at Christian@yolopub.com and let’s talk about working together one on one!

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT