One of the truisms of candlestick analysis is that when an inverted hammer signal confirms, especially in the oversold condition, the probabilities of a reversal is an extremely high probability, unofficially 95% or greater. Thursday’s positive trading, trading well above the T-line, and the NASDAQ gapping up Thursday, adds more credibility to the reversal. Short positions should be closed upon bullish confirmation and long positions can be added to the portfolio as long as the market indexes/stock price stay above the T-line.
Tuesday’s inverted hammers in the indexes require bullish confirmation Wednesday. Currently, Wednesday’s positive trading reveals indications of positive support at these levels. However, it is crucial that today’s trading does not take the indexes back down through the open. With the market conditions in the oversold condition, any bullish trading from these levels would indicate a bottom is setting up. Continue to have short positions in the portfolio but look to add long positions but be nimble.