A Dragonfly 7,882 STILL HoldingLast night, the Asian side of the trading world went moodily to bed, thinking that the bears have successfully hammered the critical 7,882 support line…only to wake up finding the support still standing! This is indeed one formidable level of support as the bears have attempted unsuccessfully to batter down this support level multiple times in the last few weeks.
Dow Intraday : Bears Succeeded briefly
At one point last night, the bears succeeded in plunging the Dow down by as much as 246 points to 7,693, way below the 7,882 support level. However, in the last hour of trading, the Dow suddenly turned around and staged a 200+ point rally from the bottom. Apparently the late intra-day rally was fueled by news that Treasury
Secretary Timothy Geithner told a group of bankers that the US Government may soon unveil a plan to decrease the mortgage payments of struggling homeowners. Such plans will help stem the rising tide of foreclosures that is a primary source of the US’ economic woes.Dragonfly Doji Sign : Requires Confirmation
As a result of the last minute intra-day rally, a rare bullish reversal candlestick pattern which is known as the Dragonfly Doji appeared in the Dow charts last night. The Dragonfly Doji is similar to the Hammer reversal pattern except for the fact that the head of the candlestick is flat instead of a small white candle.
Dragonfly Dojis are very rare in the Dow and occurs at the end of a downtrend when the market turns upwards. However like all reversal patterns, a confirmation is required in the Dow tonight in the form of a strong upward move. Until then, we still remain cautious of world markets which are tracking the Dow closely.
Strategy : Looking for a confirmation to the Dragonfly Doji
We will still be adopting a wait-and-see stance and looking for a confirmation sign tonight in the Dow to confirm the Dragonfly Doji pattern. T
ill then, the KLCI will drift listlessly today until such a confirmation sign appears.Description : Dragonfly Doji
A "dragonfly" doji is the most uncommon candle of the four different types of dojis. As with any doji, the dragonfly depicts a situation in which supply and demand are in equilibrium, thus possibly signaling an important reversal. It is characterized by having a no or a small real body and a long lower shadow.
How it Works:
During the period of a dragonfly doji, prices will typically open at a high, sell off, and then return to the opening price. Dragonfly doji are fairly unusual, but when they do occur, they often resolve bullishly.
A dragonfly forms because when there is early pressure forcing the security down, but then it finds support, and buying pressure pushes the security back up.
As significant as the dragonfly doji is, one should not take action on its message alone. Always wait for confirmation from the next candlestick before taking trading action.
HAPPY INVESTING & GOODLUCK2ALL
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