Confirmation – It’s Not Just for Catholics but Traders Too!

When is a Shooting Star not a Shooting Star? When it is not confirmed. Take a look at the chart below of Sherwin Williams, $SHW, up to April 5th. It exhibited all the signs of a top. Price action saw a gap up at the open, and a run higher that failed, closing near the low of the day. A Shooting Star! A strong signal for a reversal. Very nearly a Gravestone Doji. These candlesticks have these crazy

names for a reason right? The Relative Strength Index (RSI) was over 70, technically overbought, and with a huge volume print the signs all read lower. But what has happened since? The next day opened even higher but more importantly, closed above the Shooting Star close the previous day. It has moved on from there to close the gap and run higher in the channel. So Shooting Stars do not work? No, that is not the case. April 5th did have all the signs for a correction. But the price action did not confirm it. Every price pattern needs confirmation before you place a trade. Don’t forget it.

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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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