A Candlestick Chartist’s Wet Dream

Posted by barkand on July 13, 2012 under Candlestick charts | Be the First to Comment

Yesterday’s market action generated a variety of candlesticks, depending on which index you prefer. The S&P 500 created a spinning top. The Russell 2000 generated a hammer. But in candlestick terms there are few things more important than a doji candle after a trend of reasonable length, and the NASDAQ gave us one yesterday.

A doji is classified as a “reversal” pattern, but that doesn’t mean that prices should reverse. It is more correctly viewed as simply the end of a trend. The market has been going in some direction, in this case down, and then one day prices finish roughly where they started. It is an indication that the bears might be losing control after knocking the index down 4% since last week. It does not necessarily mean we can expect a bullish upswing. Maybe there will be a brief stalemate before the bears reassert themselves. Still, it does suggest that QLD is a better bet than QID until the market tells us otherwise.