That is the evening star candlestick pattern I’m talking about. If today downtrend persists, we will see the formation of this 3 bars candlestick reversal pattern. Therefore, be mindful of possible correction and plan your portfolio accordingly.
Below is today morning SPY chart:
Below is how the fully formed evening star candlestick pattern looks like:
Below is the “probability” of what will follow-thru after the evening star candlestick pattern is developed:
Based on the example above, it is possible that SPY may test the low of July 12th at 132.60 if today close with an evening star candlestick formation.
Currently I’ve 18% of my portfolio in short position thru TZA and SKF.
Good Hunting!
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You should backtest these patterns sometime – there is almost never an edge to them. If trading this pattern were consistently profitable, I’d be richer.
These patterns were probably already back-tested in some form by the Japanese from the past since they invented the candlestick patterns.
Like anything else, the expectation of price consequence due to these developing patterns are not guaranteed but only offer possible scenario.
In trading, all technical analysis (TA) can do for you is to offer you a supporting system to make your decision.
You may not believe in candlestick pattern but I’m sure you have other TA you rely on. Whatever work for you is the ones you should use.
To me, candlestick pattern is one of the best TA I find very useful for my trading.
In other words, to each his/her own.
Thanks for your comment.
Excellent evening star exposé
Thanks Raul3!
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