Nasdaq Comp. Failed Bullish Engulfing Pattern

Quote from NihabaAshi:
The bullish candlestick patterns you saw are Pattern Signals
An entry signal was not given until around 12noon est or 3pm est of today.
However, I cannot speak for individual stocks that you mentioned because I do not follow the price action in realtime of individual stocks Simply, I think that you think that once you get a confirmed pattern signal...
I'm saying to do proper candlestick analysis you must wait for the price action to confirm via an Entry Signal.
By the way...the Citigroup candlestick pattern in your chart is not a reliable pattern...
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You may have mistaken me for a day trader. While you trade indexes, I manage a potfolio of stocks and or short positions and seldom keep a position for less than six months. "Pattern Signals" and "entry signal " are just a couple of terms that I guess are used in short term trading vernacular?

The pattern on the Citigroup chart, I bellieve is called a bullish piercing line pattern. Your right, it isn't super reliable but it does have bullish conotations following a downtrend.

In my kind of work, calling broad turns in the overall market is highly important. Since the future direction of an index, depends on what each component does, looking at the charts of each component gives insight into what the overall index will do.

The pattern in the Citigroup chart by itself means just a little, but if 10 of the 30 Dow Jones components have bullish candlestick patterns, chances are better than even the average is going to move higher.
GE is another one. Notice the bulllish engulfing pattern, or pattern signal as you say. I do use these patterns for entry points but probably not in the way you are used to.

For example, to buy a position to hold, I would scan the market for a number of different candlestick patterns. Then I would look for a positive divergence between either or both the accumulation/distribution line and 14 day RSI. And, of course I would want to time that with a turn in the overall market.

James

GE083005.PNG
 
Quote from qdog:

You may have mistaken me for a day trader. While you trade indexes, I manage a potfolio of stocks and or short positions and seldom keep a position for less than six months. "Pattern Signals" and "entry signal " are just a couple of terms that I guess are used in short term trading vernacular?

The pattern on the Citigroup chart, I bellieve is called a bullish piercing line pattern. Your right, it isn't super reliable but it does have bullish conotations following a downtrend.

In my kind of work, calling broad turns in the overall market is highly important. Since the future direction of an index, depends on what each component does, looking at the charts of each component gives insight into what the overall index will do.

The pattern in the Citigroup chart by itself means just a little, but if 10 of the 30 Dow Jones components have bullish candlestick patterns, chances are better than even the average is going to move higher.
GE is another one. Notice the bulllish engulfing pattern, or pattern signal as you say. I do use these patterns for entry points but probably not in the way you are used to.

For example, to buy a position to hold, I would scan the market for a number of different candlestick patterns. Then I would look for a positive divergence between either or both the accumulation/distribution line and 14 day RSI. And, of course I would want to time that with a turn in the overall market.

James

GE083005.PNG
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Hi James,

Thanks for the further clarification about what your doing.

The term Pattern Signal and Entry Signal is something I learned a long time ago via my long term investments after doing weekly and monthly chart analysis.

I simply, transfered the terms to my day trading (I'm not a scalper).

As for the Pattern Signal...

Via the Bullish patterns you saw on Monday...

When do you normally go Long ???

Also, your use of a market breadth info with the RSI indicator sounds like your using it to tell you if the bullish patterns you saw merits a position.

Therefore, since your holding positions for over 6 months...

I don't understand what tells you a pattern failed that's still within yesterday's range...that's confusing to me.

Maybe it would help if you defined or explained how yesterday patterns failed:

* Stop/loss protection hit

* No entry was available

* Word failure implies a down day eventhough your still in a position

* Didn't close above yesterday's close

NihabaAshi
 
Quote from 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."
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Bloody funniest thing I have read in a long time:D
 
Quote from NihabaAshi:

Hi James,


Via the Bullish patterns you saw on Monday...
When do you normally go Long ???
Also, your use of a market breadth info with the RSI indicator sounds like your using it to tell you if the bullish patterns you saw merits a position.

Therefore, since your holding positions for over 6 months...

I don't understand what tells you a pattern failed that's still within yesterday's range...that's confusing to me.

Maybe it would help if you defined or explained how yesterday patterns failed:

* Stop/loss protection hit

* No entry was available

* Word failure implies a down day eventhough your still in a position

* Didn't close above yesterday's close

NihabaAshi
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All I meant by using the word fail is that the pattern broke down and the stock or index did not move higher as expected.
For example, a bullish engulfing pattern is expected to be followed by a white day with a higher close.
Maybe I should have said there was no follow through.

I don't have positions in any of those stocks. I don't use stops.
 
Quote from qdog:

...For example, a bullish engulfing pattern is expected to be followed by a white day with a higher close...
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Hi James,

I'll explain later today why this is an incorrect assumption.

NihabaAshi
 
lol


Quote from 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."
More...
 
Quote from qdog:

...For example, a bullish engulfing pattern is expected to be followed by a white day with a higher close...
More...

First of all, I'm going to mentioned something that's generic and very obvious in today's typical candlestick book concerning Engulfing patterns...

In most of the chart examples in those books...

The trading day after the Engulfing...presented a better entry price at a lower price in comparison to the close of the Bullish Engulfing.

With that said...

Bullish Engulfing or any type of Bullish candlestick pattern implies there's a good chance for a bullish price reaction soon after the bullish candlestick pattern.

That bullish price reaction can occur anytime among the few trading day's after the bullish candlestick pattern.

It does not imply the day after a bullish engulfing it will be a white candlestick with a higher close (breakout) although we would all like for such to occur.

Yet, the odds aren't very good that particular scenario (white candlestick with higher close) will occur.

That takes me back to the Pattern Signal and Entry Signal methodology...

Waiting and looking for a bullish reaction to the bullish candlestick pattern in the first few trading day's soon after the bullish candlestick pattern.

However, I personally prefer to see it occur in only the first day after the pattern signal.

Therefore, if a bullish reaction doesn't occur...

Then the pattern signal wasn't tradable.

Last of all, a bullish engulfing although a bullish reversal signal...

Requires confirmation via discussed at most generic online sources...such I agree with.

http://www.investopedia.com/terms/b/bullishengulfingpattern.asp

http://www.stockcharts.com/education/ChartAnalysis/candlestickbullreversal2.html

http://www.candlesticker.com/Cs32.asp

The above sites are among the first to pop up in google search engine on the words Bullish Engulfing.

Simply, the odds are high the trader will be unsatified with the price action that follows if a position is open based upon the Bullish Engulfing all by itself...

Without looking for confirmation signals among the price action after the pattern signal.

That's the reason why more often than not...you don't see any follow-through to the upside.

Yet, such doesn't imply there's no bullish price reaction eventhough it didn't close above the close of the bullish engulfing line.

As I said before...

The Index Nasdaq Composite (your first chart reference) did give a bullish price reaction yesterday around 12noon est and 3pm est with the 3pm est signal being the strongest.

A price reaction I'm sure your waiting for to occur since you tend to hold positions longer than 6 months.

Today's Analysis: We are still inside the range of the bullish patterns you saw in the Index.

We'll know soon if those swing traders can keep their gains.

NihabaAshi
 
I think you are reading more into my post than you need to.

I will again try and clarify. Some people scan a great number of charts to read the mood of the overall market.

Finding a bunch of bullish candlestick patterns that tend to peter out the following day is not a good sign. It is as simpe as that.

This is not an exact science. Sometimes things go exactly opposite the way we expect them to.

I did not post those charts to demonstrate entry or exit points.

James
 
Among trend reversal signals, I like to look for shooting stars after a downtrend with the slow stochastic at oversold levels. It's a strong implication of Demand starting to come into the market. The larger the top tail of the star relative to the body, the better the probability of a short term reversal qualified by a bullish engulfing. Works better in longer timeframes. Both Citigroup and Nasdaq charts qualify. Also today intraday YM printed a star on 30 min chart around 11:30 eastern, Nasdaq printed around 10:30 eastern. Interesting how Nasdaq leads the other markets. Moves are usually good up to the 50% retracement area from the most recent high of the pullback of the timeframe of analysis.
 
Quote from qdog:

I think you are reading more into my post than you need to.

I will again try and clarify. Some people scan a great number of charts to read the mood of the overall market.

Finding a bunch of bullish candlestick patterns that tend to peter out the following day is not a good sign. It is as simpe as that.

This is not an exact science. Sometimes things go exactly opposite the way we expect them to.

I did not post those charts to demonstrate entry or exit points.

James
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I also scan a bunch of charts to read the mood of the market...

In fact...its part of my trading plan and has a direct impact on my position size managment.

However, I strongly emphasize that the following trading day can be a bullish price reaction eventhough its not a white line with a higher close...

In fact...the price reaction can be a dark candlestick that closes below the prior day close and still be bullish.

Thus, what I saw as a bullish price reaction on Tuesday (intraday charts) around 3pm est to your bullish candlestick patterns on Monday (daily charts)...

You saw as the market petering out and as a bad sign.

Simply, just a difference of opinion based upon different experience with Japanese Candlestick Analysis.

As I said before...if your methodology with candlesticks works consistently for you...

I'm in no position to debate the merits of your methodology.

NihabaAshi
 
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