Archives for October 2018

Today’s positive trading is selling gap ups in the S&P 500 and the NASDAQ. It is also confirming an inverted hammer signal in the Dow. Provided the trading stays strongly positive today, this will provide more healing of investor sentiment, adding to the prospects that this is putting the markets in a basing area. Long positions can be added but with the caveat that the markets need to close very bullish today. Bullish flutter kicker’s are acting well. Take advantage of the strong candlestick reversal signals, providing bigger profit opportunities if this market is going to reverse/rebound.

This basing action allows for identifying which individual stocks are trading with a new direction based upon identifying very strong reversal signals. Knowing what the top ranked candlestick signals illustrate allows investors to take advantage of price movements well before the rest of the market enters those trades i.e. AMCX and DERM bullish flutter kicker, ACOR McMuffin,TLRY wedge breakout. The analysis of the ETFs, such as NUGT, allows for identifying strong buying in the gold sector. Although the markets remain in an indecisive consolidation stage, there are stocks/sectors that continue to produce good profits. The biggies, AMZN, AAAPL, NVDA etc. are not yet showing any reversal.

Be careful, the expected bounce today is providing a lot of positive trading in stocks but many stocks are not moving much from where they opened or are trading below where they opened albeit they are still trading positive. Short positions that have been showing bullish signals and are confirming today should be covered, but expect a couple days of choppiness in the markets before any major trend, either bullish or bearish will continue from here. Any trades placed over the next couple trading days should be done so with the idea that if things turn the opposite direction, go back to cash quickly.

Huge price moves obviously produce big gains. Reactions to those big price moves also provide opportunities to make some big gains. Had the markets opened dramatically lower Today, gapping down, the 10 minute candlestick charts would’ve been instrumental for recognizing when the buying started come back in. Had the markets opened positive, and showed immediately strong strength, that would of provided the visual information revealing the oversold conditions of yesterday were now being brought back up to levels where the market would have been trading at not the panic selling occurred yesterday.

Where is the market going to go? As a candlestick investor, you do not have to know the answer. You merely have to identify which direction it is currently going and be able to analyze the prospects of reversal areas/support levels. Then it is relatively easy to assess what is happening at those support levels based upon the type of candlestick formation that occurs at those levels. As illustrated, yesterday’s trading formed a Doji in the major indexes. Doji rule! The trend was going to move in the direction of how they opened today. The NASDAQ is currently trading below the low of July. The Dow is likely going to head for the 50 day moving average. The S&P 500 gapped down today showing the 50 day moving average was not acting as support. Implying more downside. Obviously these are good times for the short positions.

Yesterday, the low of the long legged Doji that developed in the NASDAQ supported at approximately the same level that the markets hit their lows in late July. Today’s positive trading in the NASDAQ is creating the potential of a bullish left/right combo. However, it needs to trade near the high end of today’s trading range to provide better confirmation the Bulls are taking control. Two things that create suspicion. The NASDAQ has bounced up and appear to have failed at the 3T-line. Also, the stochastics have turned up but not yet having reached the oversold conditions. This analysis should make you prepared for a possible bullish reversal but it still requires bullish confirmation. The Dow is currently trading lower after failing at the T-line Today and the transportation index appears to be in a dumpling top pattern. The Bulls have not yet reversed the downtrend.

Keep in mind, in a downtrend it is not unusual to see some buying early in the day followed by selling later in the day. An uptrend, the selling is early in the day, followed by buying later in the day. Today’s early buying should not be viewed as a reversal in the downtrend. What occurs at the end of today’s trading will be much more relevant. Until there is a dramatic reversal signal in the indexes, consider the current downtrend to be in progress.

The Doji that formed in the Dow yesterday created the suspicion that profit-taking/consolidation was likely to occur Today. Currently the Dow has pulled back to the T-line, not yet confirming any major reversal in the markets. Also, the NASDAQ has sold off hard, creating the potential of a bearish best friend signal if the 50 day moving average does not hold in the NASDAQ. The T-line remains a critical indicator. Long positions that are trading below the T-line Today should be closed out. They can always be bought back if the market moves prices back up. Obviously, the short positions are working well Today.

The J-hook pattern is evident in the Dow and S&P 500. The NASDAQ is not showing the same resiliency, which is good. This indicates that the markets are not in an exuberance state. There is plenty of sector rotation. There is good profitable trades both on the bullish side as well as the bearish side. Oil stocks continue to act strong, biotech’s continue to act weak. The T-line still acts as a very vital trend indicator.

The market characteristics remain the same as the past few weeks, a slow uptrend but without any evidence of exuberance. Today’s trading shows the indexes trading mildly higher, except for the transportation index, which appears to be pulling back to test the 50 day moving average. Although the overall trend is continuing positive, numerous stocks can be seen to be taking profits and/or in sustained downtrends. The bias obviously is to the upside with short positions also in the portfolio.