Last evening we penned this article on the series of eveningstar patterns that have marked recent highs in the Dow Jones Industrial average. It speculated that a fourth in a series of bearish tops was forming on the Dow daily chart. It was posted early this morning.
The market gapped lower at the open then began vacillating around the volume weighted average price (VWAP). Around 1:15 EST the index broke above a two hour downtrend line and began to rally.
Some G-20 reporting about potential progress in talks between the US and China started to leak and the market never looked back. The Dow closed up 199 points, near the high of the day, and well above the VWAP. The potential fourth eveningstar top in a row that we speculated about this morning, was negated.
A large down-day candle was required to complete the eveningstar pattern and obviously it did not form on the daily DJIA chart, in fact, just the opposite. A large white or up-day candle formed finishing just below the 50 day moving average.
We did include this caveat in this morning’s piece: Of course, when patterns become overly apparent they stop repeating.
Our analysis whether here or on social media is a reporting of technical conditions, not a recommendation. Market movement is always dynamic and fluid. Patterns require confirmation, breakouts require follow-through, and trading requires discipline. These guidelines should be self-evident to anyone who has been trading for a while.
Follow your plan. Preserve capital. Trading is a tough road to navigate. We hope that along the way our perspective can be helpful.