If you are like me, before candlesticks came along, I wanted to start buying or covering short positions on the first signs of buying when the markets were well in the oversold area. However, the combination of signals and confirming indicators, such as stochastics, allowed me to sit more patiently waiting for everything to align. Yesterday's buying, in the oversold area, didn't have the full confirmation of the markets being well into the oversold area. Remaining short or not buying was based upon the simple T line rule, until there is a buy signal and a close above the T line, anticipate a downtrend remains in progress.
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Based upon candlestick analysis, although the market indexes traded positive during the day, they may not have produced any reversals. This involves having all the indicators in alignment. The stochastics are still just heading down into the oversold condition. This would imply some more selling possibilities. The NASDAQ and the S&P 500 did formed bullish Harami's, which will now require bullish confirmation on the opens tomorrow. The Dow did not form any major reversal signal, a good indication that the bottom may not be in yet. However, today was an indication that buying was starting at these levels. Any positions in the portfolio can be maintained by using the T-line as the final factor, long positions need to stay above the T-line, short positions need to stay below the T-line.
There are some J-hook patterns working well in this possible bottoming action. Auto manufacturers are showing strength as seen in NIO and LI. Any establishing of new long positions should have very compelling by signals or patterns. Short positions can be maintained as long as there is not evidence of bullish signals and a close above the T line. Overall, these market conditions warrant being less aggressive for establishing new positions until the markets show a definite direction. This would make staying in cash a good strategy, having dry powder ready for the next market/sector moves.
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Good investing,
The Candlestick Forum team. … [Read More...]
Today's positive trading in the indexes are creating bullish Harami's, indicating the selling may have stopped. However, stochastics are just now heading into the oversold area and the day is not over yet. It will be important to see where the market indexes close today. The Dow is currently trading at the low of last month, providing the possibility of another bottom at this level. Stay predominately short but be attentive.
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The analysis remains the same, as long as the indexes are trading below the T-line the downtrend remains in progress. Continue to hold short positions and stopping out of any long positions that are showing weakness, trading below the T line. Uncertainty is what creates bearish investor sentiment. No stimulus package being discussed, inconsistency in the election polls, the virus gaining strength. This all provides an indecisive market environment.
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October 30th Daily Market Comments
If you are like me, before candlesticks came along, I wanted to start buying or covering short positions on the first signs of buying when the markets were well in the oversold area. However, the combination of signals and confirming indicators, such as stochastics, allowed me to sit more patiently waiting for everything to align. Yesterday's buying, in the oversold area, didn't have the full confirmation of the markets being well into the oversold area. Remaining short or not buying was based upon the simple T line rule, until there is a buy signal and a close above the T line, anticipate a downtrend remains in progress. … [Read More...]