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August 30, 2005
A Reversal Day?
With a weak open and strong close, there were a lot of bullish candlestick reversal patterns on Monday. Namely, the Dow Diamonds (DIA) formed a bullish engulfing pattern around 104. This could be the third reversal in four months, but we need to see follow through.
Notice that prior reversals in May and July were confirmed with a strong move the very next day. This showed bullish resolve and this is the kind of follow through required to reverse the short-term downtrend. For DIA, I will be looking for a move above 105.6. One more point. Notice that DIA opened weak and closed strong for confirmation in May. Should the stock open weak today, look for a move above yesterday’s high (104.81) for the early signal.
Posted by Arthur B. Hill at August 30, 2005 08:46 AM