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Thursday, December 1, 2016

Gravestone Doji Candle Doesn't Bode Well For This Market

Gravestone Candlestick Spotted on the Dow 

I don't rely heavily on candlestick analysis, yet is is one of the things I watch, and especially when I'm calling tops. Anyone who has been followed me over the years knows this. Gravestone not only sounds ominous, but it's often a an accurate indicator. Here's decent definition of the dreaded grave stone candle from Investopedia (linked).  

There's also something called an, "Bearish Engulfing Pattern", but in this case my definition varies from the norm. There may even be a different name for this pattern..? Please allow me to explain. 

  1. Often you see the price action continue unexpectedly, after what looks like a bearish reversal candle - in this case a bearish hanging man, which we saw last week (on Wed.). Normally we call this "being early", which some consider being wrong, after calling for a reversal. In this case I chalk this anomaly up to notoriously unpredictable holiday trading, as many traders remain on vacation going into the week after Thanksgiving (this week). This goes along with the term, "don't sell a dull market", which I wholeheartedly believe in. 
  2.   The reversal candle in question was from a week ago (wed.). The market held up and went higher within 2 days. This goes along with the theory that you don't always trust a short term breakout. Often times a 1 or 2 day event is a head-fake. I personally never trust a 1 day breakout.
  3. Next we see the market break down, as the price action engulfs the top of the bearish candle. 

See the annotations on the chart for my explanation.       

We can also confirm that gravestone doji on this DOW chart.  

As far as oil we've seen Brent break out to a new recent high, and the target looks like 54.75. Like I said earlier, "never trust a one day breakout". 

That's all I got time for today. You can follow this blog, or on Twitter @3Xtraders or @3Xtrades (private) for serious traders. Please read the FAQ linked at the top for basic rules and regulations. Take Care, AA    

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