(Click On Chart To Enlarge)
Technical Analysis very much is like trying to solve a mystery. At what point do we think that we have enough evidence to make an arrest (make the trade)? It varies in each case, and it also varies among all of the players in the market, of course. Let's look at what we've got.
The Body Of Evidence:
1. The top of the Cloud in the weekly Ichimoku Kinko Hyo chart that we looked at now is 94.625, which often acts as resistance. DRYS came out of the gate Monday morning and ran toward that level, but didn't sustain its bid for $94.
2. The point at which a 40.28 point rally completes for the CD = AB legs of the "possible" Bearish Garlety completes at 94.06. Yesterday's high was 93.88 (according my Reuters data...I saw 93.87 in trading). RARELY are target measurements exact. Yesterday's high was very close to the 94.06 target, so that objective has been met.
3. If getting through 94.00-ish is a problem for the stock, we want to see evidence of that, which would be a selloff from there, then a reversal to the downside. We got a selloff of nearly $3.00 from the 93.88 high on the day, to the 90.99 close. Now we want to see if ALL of yesterday's trading gets reversed.
4. Yesterday's candle is a Bearish Doji Star Hangman. Doji Stars aren't ALWAYS bearish (or bullish, at bottoms), but very often they are, and they at least are an alert to pay attention. Some examples:
a. The January 16 Bullish Doji Star Hammer was THE bottom of the year, thus far. It was followed by another one the next session. It was VERY Bullish.
b. The Bearish Doji Star on January 26, at the neckline of the Bullish Inverse H&S, was bearish only for one day, for a quick Right Shoulder formation of that pattern.
c. The Bullish Inverse H&S breakout candle on January 29 was a Doji Star and "possibly" bearish, but it was a DOUBLE BREAKOUT, and it was not at all bearish.
d. The Bearish Doji Star on Valentine's Day at earnings showed up after a HUGE rally, similar to the rally that DRYS recently has enjoyed, and it was followed up the next day with a "Gap To Crap" Bearish Engulfing pattern. BOTH were strong indications of a possible reversal.
February 22 (at Red #3) was a Dragonfly Doji Star (open and close both were at the top of the candle). ANOTHER indication of an impending downside reversal, and the Relative Strength Chart above was showing a negative divergence right there, which was another piece of evidence indicating a selloff.
e. The "real body" (open and close) of the St. Patrick's Day low isn't quite tight enough to be a Bullish Doji Star, but it sure has the look of one. "Close enough." The aftermath of that candle was VERY BULLISH.
5. Given those examples, we can see why we want to be alert, given yesterday's Bearish Doji Star Hangman, signaling a "possible" downside reversal.
6. Chart #2 above is the 13-21-34 sequential Fibonacci measures of Relative Strength. At yesterday's new closing high for the move, the 13 RSI is back above 70, just slightly lower than where it was at the April 23 high of 84.41, so that's looking like a non-confirmation of yesterday's new closing high, and it's set up for a "possible" Double Top, similar to what this indicator was showing before the February selloff. That's a "be alert for weakness" here.
What To Look For Today:
Yesterday's candle left a gap on the chart between Friday's 90.00 high and yesterday's 90.05 low. If DRYS should gap down below 90.05 this morning and never fill the opening gap, yesterday's candle would become a Bearish Doji Star Hangman AND a Bearish Island Reversal Candle, also known as "An Abandoned Baby." The implication is exactly what it sounds like. Imagine abandoning a poor little baby! A gap down like that would not be pretty, and personally, I would stop gathering evidence and GET OUTTA THERE, "right or wrong." Island Reversal candles are pretty reliable. Scroll down to yesterday's APPL chart and look at the TWO Bullish Island Reversal candles coming out of the August, 2007 low. HUGELY Bullish.
The top of the Bear Flag/Bearish Wolfe Wave in this daily chart comes in today at 89.72. Any close below that today at least temporarily reverses the upside breakout, putting the validity of the bullish breakout in serious question.
A black candle today that opens near yesterday's close and closes down near 87.25, or lower, would retrace half of Friday's white candle, and would put a 3-Day Bearish Evening Star on the daily chart. That's one of the most bearish patterns in the candlesticks, and also is fairly reliable. I've seen them taken out to the upside, but not very often. Those usually signal some kind of top.
So, Key Numbers for today:
90.00 - 90.05 - The gap
89.72 - Top of the flag
87.25 Close, or lower - Puts a Bearish Doji Evening Star on the chart
No comments:
Post a Comment