Black Candlesticks Are A Warning, Not Necessarily A Reversal
2022.06.07 07:41
When you see ‘black’ candlesticks; i.e a higher open, a lower close, but a close still above the prior day’s close—you need to pay attention. The only good thing is that these warnings typically only matter when ‘black’ candlesticks occur at the end of a rally—not in the middle of a mini-consolidation.
For the NASDAQ, the ‘black’ candlestick on Monday didn’t undercut breakout support and volume was relatively light. Technicals were unchanged, the index is still outperforming the S&P but we are still awaiting a new ‘buy’ signal in On-Balance-Volume.
COMPQ Daily Chart
The S&P remains primed to accelerate beyond declining resistance but was pegged back by yesterday’s close despite the intraday move higher. Technicals haven’t changed from Friday, but there is room for optimism for stochastics and on-balance-volume.
SPX Daily Chart
The Russell 2000 (via IWM) did end with a ‘black’ candlestick at the end of a rally and is vulnerable to a gap down today. The ‘black’ candlestick has also occurred at 50-day MA resistance. Assuming a down day today, we need to consider if mini-breakout support can hold (near $182).
IWM Daily Chart
The bearishness of Monday’s candlestick will be undone if there is a close above the open of the ‘black’ candlestick. The Russell 2000 is the index to watch as while I like its bullish tendencies, it had the weakest finish on Monday.
