What we have here is a spinning top candlestick pattern for the month of February. Normally, a spinning top candlestick pattern is just like any other candlestick reversal pattern, it simply offers a possible reversal signal. Nothing is guaranteed and it is merely a precaution.
However, when you have a “monthly” spinning top candlestick pattern at the TOP of an uptrend near the walls of two long-term resistance (formed in year 2000 and 2007), you HAVE to take precaution. You have to acknowledge that there may be a greater force in play here. A force that has soundly defeated the bull in year 2000 & 2007.
The month of March is now the key month to watch. It may dictate the direction for the rest of the year. A down month in March may confirm the February spinning top candlestick pattern as a bona-fide reversal signal. In other words, the walls of resistance are too formidable to overcome.
Look at the SPY monthly chart below:
Did you see the tiny spinning top candlestick bar formed in February?
I will be very mindful of the possibility going into March. Perhaps a little less tolerance in giving the trades more times to establish its uptrend. Come to think of it, I never have much tolerance with my swing trades anyway except for my position trades. I’ll be keeping an eyes for ETF such as FAZ, SKF, etc.
Just my 2 cents anyway.
4 Responses to Hazard at the top- a spinning top near major resistance
Interesting and informative post; thanks.
I share your caution after a very profitable start to the year. What do you make of the gravestone doji in yesterday’s SPY?
Thanks for reading JimH.
Yes, the almost gravestone doji in yesterday daily SPY chart wasn’t very encouraging for the bull. I said “almost” because a doji requires the opening and closing prices to be very close to each other if not the same.
Doji or not, yesterday gave us a tell-tale sign.
I notice you used an hourly chart this week. Just an observation here… As the trading day consists of 390 minutes, ever thought of using 65 minutes divisions to break it into 6 equal segments? It puts more meat on the final candle.
Very interesting idea. I will try it. Thanks for sharing!