On these type of trading days, huge knee-jerk reaction, the prudent strategy is not to do anything until the market settles down, which may take most of the morning. These are days were big profits can be made by using the five-minute and 10 minute charts.
Today’s positive trading is creating bullish trend kicker signals in all of the indexes, including the transportation index which had been the weak sister. It has moved all the indexes up above the T-line. A close near the high end of the trading range today would be the convincing factor. A kicker signal and a close above the T-line is a strong indicator that more upside will follow.
The market continues to confirm the basing/reversal signals of last week. Especially the Dow and S&P 500, a trend kicker signal through the T-line with today’s positive trading forming a bullish Doji sandwich. This implies more upside, making the slow upward trend channel the likely analysis. Stay predominantly long, but there are still short positions that are working.
The most important factors of candlestick analysis is where prices open and prices close. That was very evident in yesterday’s trading. The market indexes showed very bullish strength throughout most of the day but closed at the lower end of the trading range at the end of the day. Obviously this illustrated the bullish strength was not sustainable. Today’s markets are trading positive but not with any decisiveness. Each individual trading day creates a formation. The candlestick investor has the advantage of evaluating what the strength/nature of a trend is doing. The uptrend should be in progress but not with any great conviction. Stay predominantly long but still have good short positions in the portfolio.
Yesterday’s candles in the indexes is a clear indication of why the close is the most important aspect. After the indexes traded bullish all day, they sold off in the final hour. This was somewhat suspected based upon the stochastics had not quite yet reached the oversold condition and the indexes were still trading below the T-line. Today’s trading has experienced a gap down in the oversold area, requiring a little bit more diligence as far as a potential reversal. Remember, if you see a gap down in the oversold conditions, start watching for a reversal. But until then, remain predominantly short. Numerous stocks traded positive yesterday but are trading lower again today. Gold stocks are acting strong with gold prices up strong today.
Last March and April I did a series of blog posts on Oil. I said that the recovery in Oil was confirmed when the Crude Oil Futures Contract went above $37.09. Since then, it made up to over $51, a 45% gain! I also called out a few trades ideas like; WLL, USO and TOO. The first two were home runs with really nice gains and TOO still has some potential.
Oil now looks like it will retrace a bit before continuing its run up. I expect, based on Fibonacci retracement analysis, that Oil will pull back to between $45 – $41. After that retracement, the targets are still to between $63 to $83 through the rest of this year and maybe into next.
While we are waiting for the Oil retracement to play out, I like Natural Gas. It is showing nearly the same pattern that Oil did, just lagging by a few months. In the video, I review the pattern on the chart and explain my rationale. The percent gain for Natural Gas has the potential to be really good and I am pretty excited about it.
In the next post, I will point out some Natural Gas related trades that I like a lot.
Thanks and stay tuned!
MBA from the University of Washington. Dean is an expert in Technical Analysis, Money Management, Elliott Wave Analysis and founder of FollowMeTrades.com.
Well, if there were any doubts about the Oil recovery, hopefully those have been put to rest. We initially called out $37.09 (on the Crude Oil Futures contract) as the trigger level that confirmed the recovery in Oil was underway. That was back in early March, six weeks and 12% worth of gain ago.
And it is highly likely to continue up to the projected levels of $63 – $84. It won’t go straight up, but the Technicals are clearly pointing to those levels through this year and next.
We called out a few potential Oil trades as this was playing out;
WLL: Initial entry was $8.57, Initial stop of $3.33, target of $17.25. We got an entry on that and it is now at $10.84, a 26% profit so far! It is on its way to the target and stop has been raised to $6.56. Very nice!
USO: Entry was at $10.25, initial stop at $8.13 and a target of $15.75. We got the entry and are at 2% profit with the projection still looking great.
TOO: Entry was at $6.79, initial stop at $2.62 with a target of $16.09. We got our entry and current price is $6.82, a profit of 2% so far. Stop has been trailed up to $4.73.
These trades still look great and there is a high probability of them hitting the targets for really impressive profit.
If you like these updates on Oil and the specific trades, be sure to let us know and we will continue to provide updates.
Today’s bullish trading is creating possible candlestick reversal signals. Possible meaning if the markets continue to hold up going into the close, the NASDAQ will have shown a Doji reversal off the 200 day moving average. The S&P 500 will show a Doji reversal off the 50 day moving average and the transportation index will have formed a bullish Harami, indicating a trend channel could be in progress. The only caution indicator is the stochastics not yet into the oversold area, implying there may still be a day or two of consolidations in the lower trend ranges before a sustained uptrend might be starting. It will be important to see how the markets act going into the close.
The downtrend remains in progress. It is not unusual to see buying in the initial trading during a downtrend, as was seen in today’s trading. However, when stochastics are still heading down, not in the oversold area yet, and the candlestick sell signals were very compelling, a Doji gap down through the T-line in the NASDAQ, early-morning buying has to be viewed with skepticism. Stay predominantly short until there is a compelling reversal signal in the market indexes.
Although the markets are not selling off great resiliency today, the fact that the markets close below the T-line on Friday after the Doji day of Thursday provides a strong probability the downtrend is likely to continue. Currently the Dow is used the 50 day moving average as support but also has use the T-line as resistance. Until there is a strong reversal signal and a close backup above the T-line, consider the downtrend in progress. There is a possibility of a trend channel in the NASDAQ, making the May lows as a viable target. The oriented more toward the short side in the portfolio.