Candlestick “Hammer” Predicts Rise in the S&P
Posted on 01. Mar, 2010 by Global in Uncategorized
The S&P 500 is about to take off.
The Candlestick “Hammer” pattern is one of the most reliable bullish Reversal patterns of all. We see it now in the Daily price bars of February 5, 2010 in the S&P 500, the Dow Industrials, and several other Indexes as well.
The “Hammer” is usually a tall price bar at the bottom of a substantial price decline, denoting a substantial range of prices during the day. The “real body” of the pattern (i.e., the range between the Open and the Close) will be very small, and will be located at or near the top of the price bar. This tells us that even though there was substantial price movement during the trading day, when all was said and done at the end of the day the bears were not able to drive prices down and that prices ended up close to where they began when trading began on that day.
What is most interesting here is that the Candlestick “Hammer” was replicated across several Indexes, covering not only the 30 Dow Industrials stocks but also the complete range of the NASDAQ stocks and the smaller-capitalization issues. This indicates to us that the mood of traders across the board is optimistic, and that there is a good likelihood that prices will now advance, if not on the next trading day then almost certainly within the next few days.
Of all of the Candlestick Reversal patterns, the “Hammer” is one of the easiest to spot. Whenever it appears, we pay attention, because its record of price prediction is one of the most consistent and successful of the lot.
The author owns CandleWave, LLC, which publishes an investment newsletter at http://www.candlewave.com/ He is a retired attorney and corporate CEO, and has passed the NASD Series 65 Investment Adviser exam. His “Action Suggestions” cover the major Indexes, Gold, Silver, Crude Oil, five Forex pairs, the Dow Industrials individually, and the NASDAQ 100 in a search for reversals of trend as they are about to emerge.
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