Nasdaq Comp. Failed Bullish Engulfing Pattern

Discussion in 'Technical Analysis' started by qdog, Aug 30, 2005.

  1. qdog


    On Monday I noticed a great number of bullish candlestick patterns. On Tuesday, most of them failed. A good example is on the Chart of the NASDAQ composite below.


  2. Pabst


    Looks like a tall white guy about to get mugged by two smaller black dudes.:)
  3. Imagine if you had won the election. A congressman making that joke would generate front page scandal headlines for a week! :D
  4. Pabst


    Bro, I ain't ready for prime time. (Or the white collar world):)
  5. What you saw yesterday is called the Pattern Signal day...

    Regardless to the type of bullish candlestick pattern.

    Today, was the day to look for an Entry Signal anywhere in the intraday price action after some sort'uv a price decline.

    I saw a few Entry Signals today in Nasdaq Composite around 12noon est (2123.00) and again around 3pm est (2120.00)...

    With the strongest of the two bullish signals around 3pm est.

    Nasdaq Composite closed around 2130.10

    Will there be follow-through to the upside tomorrow ???

    Doesn't really matter because any swing trader that got Long around those times is already at a profit and most likely has a trailing stop somewhere above breakeven.

    However, tomorrow could go either way especially since its a big day of key economic reports:

    * 0830am est GDP Report

    * 1000am est NAPM-Chicago Report

    * 1030am est EIA Petroleum Status Report

    Thus, the only failure was that you missed the Entry Signal after your analysis caught all those bullish candlestick Pattern Signals.

  6. Pabst


    In fact RM, I could see that whole bit in a sequel to Trading Places.

    The Duke Brothers could be teaching Billy Rae Valentine candlesticks, and he be like: "Man this market's gonna get smoked. See that white dude standin there all by himself, surrounded by those black motherfuckers. He's gonna get his ass kicked, I don't care how much bigger he be."
  7. Pabst - nice joke

    NihabaAshi - thanks, as usual, for the excellent commentary
  8. coasting


    Hmmm, the Duke brothers would say, look at the last 10 dudes before the big white dude showed up. Which were are they going Mr. Valentine?
  9. qdog


    That is of course, unless one is a position trader who scans charts of indexes and key stocks as a means determining future market direction.
    On Monday a good number of dow components closed in bullish candlestick formations. On tuesday they all failed to confirm. Tomorrow could go either way? Any day can go either way.
    Citigroup below, a component in the Dow 30 and other indexes is a good example.



  10. Hi James,

    It really doesn't matter whether one is a day trader, position trader or swing trader...

    The bullish candlestick patterns you saw are Pattern Signals and based upon the Nasdaq Composite chart you first posted...

    An entry signal was not given until around 12noon est or 3pm est of today.

    Therefore, they did not fail.

    However, I cannot speak for individual stocks that you mentioned because I do not follow the price action in realtime of individual stocks except for an occassional peak a few times per week at my long term investment holdings.

    Simply, I think that you think that once you get a confirmed pattern signal...

    You are thinking to enter immediately no matter what the price action is saying after that pattern signal is confirmed.

    (please correct me if I'm wrong)

    I'm saying to do proper candlestick analysis you must wait for the price action to confirm via an Entry Signal.

    Thus, there are two signals..

    One called a Pattern Signal and the other called an Entry Signal.

    Simply, if the entry signal doesn't get confirmed...

    The Pattern Signal didn't fail nor wasn't tradable.

    Yet, I'm not trying to convince you th change your approach to candlestick analysis especially if your satisfied with your results of only trading via the pattern signal only.

    If it works...keep using it.

    By the way...the Citigroup candlestick pattern in your chart is not a reliable pattern...

    Another reason to use an Entry Signal to confirm the price action will support the Pattern Signal.

    Although I don't have access to an intraday chart of Citigroup...

    However...I suspect there probably were some Bullish Hammer patterns off the intraday lows today to validate an Entry Signal...

    A valid Entry Signal that's profitable by the close would confirm that the Pattern Signal you saw yesterday (although weak)...

    Did not fail.

    Now that we both know we have different interpretations of candlestick patterns...

    I'm curious what today would have needed to do from open to close to tell you that yesterday bullish patterns did not fail ???

    Maybe I'm just a little surprised that today's price action that's still within the range of yesterday's price action is called a failure by you considering most candlestick traders I know would have waited for some sort'uv confirmation signal to yesterday's analysis.

    Last of all, my comment about tomorrow can go either way is based upon the fact that swing traders using candlestick analysis via a Pattern Signal and an Entry Signal methodology...

    Most likely got long off today's lows and are already profitable.

    Tomorrow will determine if their profits will grow or decrease.

    That's what my comments meant and is applicable for those already Long and not planning to chase yesterday's daily chart bullish candlestick patterns in Wednesday's price action...

    Window of opportunity for an Entry in Tuesday's price action has now closed in reaction to Monday's bullish candlestick patterns.

    P.S. The indices and their heavy weight components perform very well to Hammer patterns (big hint).

    Sometimes I wonder if that saying about buy low...sell high was coined by Hammer pattern traders. :D

    #10     Aug 30, 2005