Hollow Red Candles

Today saw the major index ETF’s: SPY, IWM and QQQQ print Red candles that should make the bulls happy.  Wait a minute the bulls are the guys that think the market is going higher.  A red candle means it was a down day right?  So why should they be happy?  Look at the chart of the QQQQ below to illustrate.

This chart shows the daily candles for the QQQQ since the recent uptrend began at the beginning of September.  Notice that the last print is red and lower than the previous day.  In the case above the QQQQ’s opened lower than the previous day and near the low of the day and then proceeded to trend higher throughout the day, but closed below the previous day’s close.  Thus it was a down day and a red candle.  Investors and traders that get their market information from the evening news will hear how stocks dropped on the day.

Hollow Red Candles

Now notice that the candle is hollow, not filled in like the red candle 2 days prior.  This is intentional and meant to show yet another piece of information that Japanese Candlesticks can convey about a stock that line and bar charts do not.  Hollow Red candles are special because they show a reversal of sentiment within the day.  In a quick glance a hollow red candle tells that the day was bullish despite ending lower.  Look for these candles and their opposite, the Solid Black, to get further insights into short term swings in sentiment in the market.

Trade’m well!

(As always you can see these individual charts and more on my twitter feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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