Shooting Star Reversal Signal in the Dow

Today’s shooting star signal in the Dow and transportation index illustrates the bears starting to take control. A lower open in the Dow tomorrow would confirm the trend has reversed. This does not necessarily mean a full-scale reversal, but the prospects of profit-taking back to the T line. Add the fact that the NASDAQ is still in a strong downtrend and the S&P 500 sold off hard today makes the trading strategy-oriented more toward the short side.

Remember the common sense logic of the Japanese rice traders. Where do most people buy? Exuberantly at the top! This was indicated in the gap up shooting star/Doji’s in our recommendations of NUE and HZO. The gap up in the overbought area, away from the T line, was the alert for starting to take profits. Candlestick analysis provides common sense trading strategies. The probabilities are dramatically in your favor when you know what alerts to look for when taking profits. Short positions can be added to the portfolio upon weakness in the market indexes tomorrow.

Chat session tonight at 8 PM ET.

Good investing,

The Candlestick Forum team