The DOW produced a perfect Hammer yesterday which was a pleasant surprise. The Bulls need to act on this now and push on towards a test of the Marabuzo line from Mondays dreadful session at 12422. There is a lot of work to do here before we would be going long in any sizable fashion. However, we are tempted to dip our toe here as the Hammer was produced from a support level going back to the 31st of March at 12159.
Indicators in Play
A Hammer occurs at the bottom of trends and is a reversal pattern. Its shape is formed when a market opens, takes a spike down and then recovers to close near the top of the days range. This gives us a small body with a long lower shadow.
A Marabuzo line is the 50% point between the open and close on a large range day where these two points are at or close to the days extremes.
Summary
We are still with the Bears especially after our failure to reach 12677 followed by the harsh sell off. However, its an awkward place to sell right here. We would feel more comfortable either selling strength to our Marabuzo line at 12422 or going with the Bears on a break of our 12046 support.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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