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Saturday, February 25, 2006

Trading Wisdom -- The most difficult thing for traders to do is to sit there and wait. Why? Because we are in a society that is on a total dopamine binge, and this is never more clearly manifested than by those who absolutely HAVE to be in the markets at all times, absolutely NEED to be trading, and absolutely CANNOT WAIT. They are human do-ings.

 

Engulfing Line (Bullish) Short-term Pattern


Implication


An Engulfing Line (Bullish) indicates a possible reversal of the current downtrend. This pattern is an indication of a financial instrument's SHORT-TERM outlook.


Description


The Engulfing Line (Bullish) occurs when the Real Body for a price bar is larger than the Real body for the previous price bar. In addition, for an Engulfing Line (Bullish), the Real Body of the previous session must be Black (close lower than open) and the Real Body of the second session must be White (close higher than open).

Outside Reversal

 

Criteria that Supports


The difference in the sizes of the two Real Bodies can be an important indicator of the signifiance of the Engulfing Line. If the Real Body of the previous session is substantially smaller than the Real Body of the following session then this pattern should be considered more significant. The greater the size difference the more significant the formation.


The longer and higher the inbound trend that leads into the Engulfing Line, the more significant the pattern. Look for heavy volume in the following session. A noticable increase in volume from the previous few sessions is a strong indication that this pattern is more significant.


If the following session "engulfs" more than one session's Real Bodies this pattern is very significant.




Monday, February 26, 2007

Morning Update - Bullish Outside Reversal and Big Rallies


"You know what? It has just been taken everything in me not to do a whole bunch of new weekend updates! I am like dying here! However, I want to make sure, that some of the updates I did this past week were of such significance, in the fact, I want people to spend time really listening, and not just blasting out update after update, because remember it's quality not quantity. And sometimes when we get bombarded with too many updates, we pick and choose which ones we are going to listen to, or pay attention to, because after all, you've got dozens and dozens every week to choose from. So, I am actually on purpose, making sure people go back and review what we went through last week, because they are just some really good updates, if I don't say so myself."

Please click on the trading journal link provided for you below, in order to print out your trading journal sheet if you need a new one. This is the first step that you need to follow on your path to achieving "sudden profits." This is what is called doing your technical analysis homework an equity before you enter a trade. Remember that a good trader is disciplined and always plans their trades and so should you, because a failure to plan is a plan for failure! You may already have one for the stocks that John will be talking about today, because they are already in the portfolio. Using this journal is a great way to learn how to trade with a trading journal! This way, you can update your trading journal as you read and listen to the updates. Jotting down notes will help you learn what is important to look at in the technical analysis of each chart. You can also refer back to your notes to see why you entered the trade, the issues you had will holding the stock as you waited for it to reach price target, and why you exited the stock, and whether you made a profit or a loss. This enable you to identify what your trading strengths and weaknesses are. The time spent doing this will help you eliminate your weaknesses in order to become a good trader. Old habits die hard. We want to encourage you to get rid of those weakness so that you can become even more profitable as a trader.

Please Note: This is not a requirement that you do this. There won't be a test or anything like that.(lol) It is just a suggestion, we do believe that this is a helpful tool for our subscribers to use. We provide it for you for your convenience. The decision is left up to you.

Engulfing Line (Bullish) Short-term Pattern--- also referred to as an Outside Bullish Reversal

Description-They are Single Candlesticks - The Engulfing Line (Bullish) occurs when the Real Body for a price bar is larger than the Real body for the previous price bar. In addition, for an Engulfing Line (Bullish), the Real Body of the previous session must be Black (close lower than open) and the Real Body of the second session must be White (close higher than open).

Implication - An Engulfing Line (Bullish) indicates a possible reversal of the current downtrend. This pattern is an indication of a financial instrument's SHORT-TERM outlook.

Criteria that Supports - The difference in the sizes of the two Real Bodies can be an important indicator of the significance of the Engulfing Line. If the Real Body of the previous session is substantially smaller than the Real Body of the following session then this pattern should be considered more significant. The greater the size difference the more significant the formation. The longer and higher the inbound trend that leads into the Engulfing Line, the more significant the pattern. Look for heavy volume in the following session. A noticeable increase in volume from the previous few sessions is a strong indication that this pattern is more significant. If the following session "engulfs" more than one session's Real Bodies this pattern is very significant. (Pattern definition supplied by Recognia ) Please refer to the chart below.

What is the implication of a Bullish Outside Reversal when it occurs on a weekly chart during a shortened trading week? Is it less Reliable? Here is my answer: Single candlesticks patterns - are only as reliable as one single candle stick can be. They do need to be confirmed with follow through action. ( I am sure that there are a number of factors that play into whether a single candlestick is reliable or not.) Regardless, I believe that when a Bullish Outside Reversal occurs on a weekly chart. The implications of the reversal are intensified and become more important. Therefore, it's appearance on a weekly rather than a daily, chart increases the significance and strength of the bullish event. It is further intensified when it occurs on heavy volume that exceeds the prior weekly volume. This is a sign of institutional accumulation. The higher the volume the stronger the reversal. Also remember that when this pattern occurs on a longer / larger time frame it takes precedence over the daily chart.

$GASO - Unleaded Gasoline - (Continuous Contract End of Day)- Bottoming Triangle Pattern - I can't let this go by. As far as gasoline goes, I have to bring it up.This has been huge. Everything that has been going on in the commodities has been huge. But gasoline has been parabolic huge. I want to bring a couple of things up, just as far as commodities in general. That they have rallied more, off the January lows ,I mean just huge , in comparison to let's say where the $SPX is. Do you know these facts? The $CRX has been up almost 12% in the past month, versus the $SPX which just tacked on a couple percent? Did you know, that the OIH, from the time that I got back from DC, just last month that the OIH that has rallied almost 12% off the lows, and again, we are talking about in the same time span that the $SPX has just moved 2% or 3%. That the commodity sector has just been on fire! Now, there is a good news and bad news situation with that. Number one, I want to make sure that I cover all the portfolio stocks all the time. I actually think I always try to do that, but sometimes you know what, I'll go through certain sectors and talk about them a lot. Did you know that, as many time as I update the OIH, that there is only one stock that we have that is actually in it, as many times as I update it, that is WFT. The OIH is just a pretty good benchmark, just like the $EPX and $OOG, but really, we don't have any stocks that are in the OIH, other than WFT. OK. Now, looking at the commodities, I also want to mention that as far as gasoline goes, and as far as a lot of commodities go, like gold and Silver, we are going back to highs we have not seen since last may of last year in gold and silver.

If you login and go to the members homepage and go to the Futures Update page. Every day, I will update the Futures page. Every single day, I will update the S&P 500 in Futures which is ES, NQ is Nasdaq futures, Dow is YM futures, then of course, there is the OIH, XAU,USD, Gold and Silver. My point is that Silver broke out of a symmetrical triangle, which you will be able to see when you login and go to the link that says Futures Update, under each days heading. In that futures update, you will get all sorts of different commodities updates, Crude Oil, Natural Gas, Heating Oil, Platinum, the XRB, which is the RBOB gasoline futures, you just see that it has just been monster.

But, we are going on unleaded gasoline highs not seen since August. August of last year! Remember when 11 hurricanes in the gulf was a coming? Yep. We, we are back to those levels. This is just an expanding triangle pattern. I am updating this, because I am excited about this. Well, not really, because who want's to pay more at the pump? But, when the analysis is, let's say is parabolic, it is hard not to update.

Now I want to talk about the bullish Outside Reversal on a Weekly Chart.

APA--OUTSIDE BULLISH REVERSAL ON THE WEEKLY - not much to talk about APA it has been a good performer - just an example of a bullish

DIOD--JUST A BIG RALLY- not much more than that. DIOD broke the down trend line on the linear charts, but not the log charts. Heavy volume

HMY--OUTSIDE BULLISH REVERSAL- Last week HMY had a bullish outside reversal. This means that the highs and lows, took out the prior week's highs and lows on the weekly. Which is more significant than the daily. I am not a big single candlestick person. I don't read a lot into that. It is just a single candle. However, it is on a weekly. It has been a laggard, because of the Rand.

JOYG----JUST A BIG RALLY - massive volume

PDC--OUTSIDE BULLISH REVERSAL - What is significant about a bullish outside reversal in this case. It either happens or doesn't', in this case, it did happen. It did end up engulfing the prior week's candle. It did take out the highs and the lows from last week. This significant, not because this was a shorted week, but because the volume was higher for this candle than the previous week's candle . It does need follow through this week for confirmation.

WFT--OUTSIDE BULLISH REVERSAL - occurred on heavier volume - this is significant.

I am not reiterating a buy on these, I might later on this week.

$GASO
Stock Charts

PORTFOLIO POSITIONS

Stock Charts
APA--OUTSIDE BULLISH REVERSAL
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DIOD--JUST A BIG RALLY
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HMY--OUTSIDE BULLISH REVERSAL
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JOYG----JUST A BIG RALLY
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PDC--OUTSIDE BULLISH REVERSAL
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WFT--OUTSIDE BULLISH REVERSAL
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