shooting star by Mr. Steve Nison

[Scubawarrior]

   In mid March, the cash S&P had a shooting star. For those who are new to candles, see the shooting star exhibit below. The shooting star's extended upper shadow visually displays that the market had rallied during the session, but by the end of that session the bears had dragged the market down to the lows (either that or the bulls retreated).


   Now let's turn our attention to the chart of the cash S&P . I show a shooting star in the red box with the high of that shooting star as resistance (denoted by the red line). In early April the market marginally closed above this resistance area as shown by the blue arrow. This was no means a decisive breakout above resistance and many traders would wait to see if the next session also held above that red line on a close to confirm a breakout. However, for those who viewed this as a break of resistance and, as such, turned bullish, observe what happened the next session. That's right, a doji.


The idea of adapting to the market, if one was bullish because of the close above the red line, the market told us that the next session (via the doji) that the tone of the market had changed from one in which the bulls were in control to one in which the market was now neutral. This doji and failure to sustain the higher closes would be strong warnings to reassess any long positions one might have on that breakout the day before.


                                                                                       Steve Nison


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