Something very unusual just popped up on the charts, and I need to share it with you.
In Candlestick-speak, a 'Doji' pattern occurs when the opening price and the closing price for a given time period are the same, or nearly so. The Doji is understood to be a demonstration of 'indecision,' and is a warning of a possible price reversal.
On October 2, 1987, the DJIA open was 2639.20; the close was 2641, clearly a Doji.
On October 5, the next trading day, the open was 2641.00 and the close was 2640.20, also clearly a Doji.
Note also that, as between the two days, the closing prices were nearly the same: 2641 and 2640.20.
The Crash followed.
People who were on the scene in October recall strongly that the Crash "Came out of the blue." Nevertheless, a review of the Dow Industrials Candlestick charts of that time reveals that their recollection is faulty. Not only did the Crash "Come out of nowhere," there were days, even weeks, within which an investor could have escaped to safety if he had only been able to read the warning signals.
Now to the current day:
On June 5, 2009, the open was 8751.65; the close was 8763.10. A Doji.
On June 6, the open was 8759.30; the close was 8764.50.
On June 7, the open was 8764.85; the close was 8763.10.
All of them qualify as Doji.
Now note also that, as between the three days, the closing prices were nearly the same: 8763.10; 8764.50; 8763.10. That's a truckload of Indecision!
Very interesting. Will history repeat? We shall see. However, coming at the top of a strong advance, I read this pattern as Bearish.
Multi-bar Candlestick patterns which display inter-day closings at or about the same price ought to have a name. I propose 'Kobe Moonbeam' for the bearish version and 'Kobe Sunrise' for the bullish version.
William Kurtz June 10, 2009
About the Author:
The CandleWave.com website publishes our Investment Newsletter and issues investment Action Suggestions to subscribers three times per week ' Indexes (w/ safety stops), Gold, Silver, Crude, 5 Forex, Dow 30. CommoditiesJunction.com issues our Commodities Daily Report. The Candelaabra website sells our copyrighted 'Candelaabra' technical analysis system Operating Manual and 30-day Joint Trial of Candelaabra and of Genesis' Trade Navigator platform. GET IT HERE NOW at http://www.candelaabra.com William Kurtz CandleWave, LLC info@candlewave.com