Why Today’s Flat Open Is Good For The Market

By | October 22, 2018

The market is opening relatively flat this week. That could be a good thing from a technical perspective.

On October 18, we noted that a series of eveningstar candles formed on the daily charts of the major market indices. This pattern represents a transition from bullishness to bearishness.

By the the end of that week, large high wick doji candles had formed on the weekly time frame. They had been proceeded by a long dark down-week candle the previous week.

Some readers already know where we’re going with this. A large down week, followed by a narrow opening and closing range week, are the first two stages of a morningstar formation. The third and final stage would be a large white or up-day candle. Today’s flat opening keeps that option in play. If the market had gapped higher or quickly dropped lower the morningstar would be out of play.

The morningstar has the opposite implication of an eveningstar. It reflects a shift in sentiment from bearishness to bullishness.

So, on the daily time frame we have an eveningstar but on the weekly time frame there is the potential for a morningstar.

The weekly pattern has a long time to develop but holding last week’s low area is important.

Keep your fingers crossed and eyes on the charts.

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