Warning, warning, Will Robinson! Today’s large gap up held up most of the day but saw selling going into the final hour. This created a Shooting star type signal in the Dow after it had exceeded the all-time high in the market. This may be the classic buy on rumor, sell on news. At these levels and witnessing indecision/sell signals in the Dow, the NASDAQ, the S&P 500, and the transportation index, be ready to take profits. Any long positions that have shown weakness, candlestick sell signals, be ready to close out and start shifting to short positions. There remains a lot of unknowns in the political theater. These market conditions warrant adding short positions to the portfolio, maintaining any long positions that have not shown sell signals, and maintaining a heavier cash position. This means any trades being established should have very compelling buy signals or sell signals.
There are some very strong sell signals, OSTK and LRN had bearish best friend signals formed today. These positions can be shorted on a week market open tomorrow. Investor sentiment may be in a whipsaw mode if investors are watching the Senate race. As a candlestick investor, you may not know the outcomes of specific events that will affect the market, but the visual aspects of candlestick charts allow you to analyze what everybody else is thinking based upon possible future events. A good example is witnessing the airlines stocks opening much higher but closing at the low end of there trading ranges. This produces valuable information as far as continued strength or the lack of continued strength in the sector. On the other hand, the cruise lines open positive, closed positive but indecisively positive. Knowing what to expect after those type of graphics allows for much more accurate assessment of which way the sectors/stocks are likely to move.
Chat session tonight at 8 PM ET.
Good investing,
The Candlestick Forum team.
