Highly-reliable reversal signals

highly-reliable reversal signals

For now, ignore the red candles and focus only on the white and black candles that form the left sides of each drawing.

You may have noticed that a lot of “spikers” have gone up too far too fast. These are the stocks that become perfect short candidates for a 1-3 day hold. You may have noticed some of the patterns (above) before, but I’ll give you some examples and what to look out for.

Evening Stars are one of the most reliable reversal patterns available. The failure rate is extremely low and I can’t remember the last time I had a major problem with them. What’s happening is that as each day passes during the rally, the open-close range gets smaller meaning that the buying is starting to slow down. The “cross”, called the doji, at the top signals that the rally has entirely stalled and there is some confusing among both bulls and bears as to which direction the stock should go. This doji day is critical because what happens the next day will most likely continue in the direction of the winner.

Because the rally stalled, it means that the bears have taken some control away from the bulls and there is a very high chance that the stock could drop the very next day. If that does occur, that’s called the evening star and that consists of a long white candle, the doji in the middle, and a down day. Just because a stock dropped to confirm this pattern does not mean that it’s too late to short. Most of the times, this is only the beginning.

Shooting Stars are one of my favorite patterns. They remind me of a comet (or shooting star) falling down to Earth and that’s exactly how the Japanese rice futures traders named this pattern. It’s an ominous sign that a stock (or rice) will drop very, very soon. (more…)

Success and Failure

* If you want to increase your success rate, double your failure rate – Thomas Watson, Sr.
* I’ve failed over and over and over again in my life and that is why I succeed – Michael Jordan
* A successful man is one who can lay a firm foundation with the bricks others have thrown at him – David Brinkley
* We succeed only as we identify in life, or in war, or in anything else, a single overriding objective, and make all other considerations bend to that one objective – Dwight D. Eisenhower
* What’s money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do – Bob Dylan
* Success is not final, failure is not fatal: it is the courage to continue that counts – Winston Churchill
* You only have to do a very few things right in your life so long as you don’t do too many things wrong – Warren Buffett (more…)

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