The stock market has been good to us for a long time, could it all be about to end? I am definitely not a perma bear nor a perma bull and like many seasoned traders, I use technical analysis and prior price history to make my trading decisions. Unlike many, I focus on weekly chart time frames rather than the daily chart time frames so let’s take a look at last week’s action and make notes for this week.
I will start with a cheat sheet of candlestick patterns that Scott Redler shared on Twitter over the weekend and we can revert back to see if any charts look like anything on the cheat sheet.
The $IWM which tracks the Russell has put in a weekly closing candle that looks to be a shooting star candle as you can see on the cheat sheet above. What I will be watching closely into 4pm on Friday 8/4/17 is to see if price closes under the low of last week’s candle or not. Last week’s $IWM low is 141.47 so a weekly close under this number will be a good indication that some volatility can start showing it’s face in the short term meaning days to weeks. A close over 141.47 next Friday will invalidate the shooting star weekly candle and we can look for other clues at that time. For now, I will sit on my hands and manage what I already own as we don’t need to make a trade every single day to be successful. See the $IWM Weekly shooting star chart below.
8/3/17 $IWM Update. Unless price gets over 141.47 at tomorrow’s close, I will likely establish a position in $TZA as the shooting star last week will be confirmed.
The $SPY which tracks the Standard and Poors 500 shows a weekly doji candle basically meaning bulls and bears playing a game of tug-o-war. These doji candles usually appear at tops and bottoms of price action and could indicate a reversal in price if confirmed. Like the shooting star candle on the $IWM (see above) the doji will also be confirmed bearish if this upcoming Friday’s close is under the low made last week of 245.68. If not, then stick to the trend. See the $SPY weekly doji below.
8/3/17 $SPY Update. The weekly doji that printed last week will trigger with a closing price of 245.67 or lower at tomorrow’s close. I will likely buy $SPY weekly puts if we get confirmation tomorrow.
Next up is the $QQQ which tracks the technology sector. Last week’s candle looks very similar to the $SPY except $QQQ closed the week red while $SPY closed the week slightly green. Does it make a difference if a doji close slightly green or red? IMO no, what is important is this week’s weekly closing prices and the rest is noise. Try to keep trading simple and let price lead the way. This doji will confirm bearish if price closes under 142.30 at the end of the upcoming trading week. See the QQQ weekly doji below.
8/3/17 $QQQ Update. Last week’s doji or some may argue a spinning top will confirm if price closes tomorrow under 142.29
The $DIA is the ETF that tracks the Dow Jones 30 and we will see a totally different look on last week’s closing candle. You can see that price closed near the all time highs and this maybe the savior for the downfall of the 3 ETF’s mentioned above. There is not much to talk about on this chart so let’s focus on the other 3 since they are the ones giving us the warning. Price < 20 w ma would get me cautious, but until then the trend is still up. See the $DIA Weekly chart below.
8/3/17 $DIA Update. Continue riding the trend for now. $DIA looks the best out of the 4 horsemen.
To review, this upcoming week could have some chop, try to ignore until Friday’s close. Thank you for reading and wish you the best in the week ahead.
8/3/17 Update. We saw chop, let’s see if $IWM and $QQQ will give us a light to get short tomorrow.
-Anthony Verdone @WeeklyTrade on Stocktwits, @Anthony_Verdone on Twitter.