Doji Candlestick and Weakness
Doji candlestick pattern and weakness today. The Emini rose 1.5 points and closed at 1,360.75 on Tuesday. Normal trading volumes resumed today but no breakout move yet. Does today’s trading activity help determine the next market move?
Doji candlestick shows uncertainty
The Doji candlestick pattern has been discussed in a previous post. Briefly, Doji is the name of a Japanese candlestick charting pattern that occurs when the open and close of the bar are virtually identical. Today’s Emini open was 1,359.75 and the close was 1,360.75 - so the open and close were within 1 point of each other.
This pattern shows there is indecision in the market and usually occurs at turning points or mid-trend. Today’s particular pattern was a Star Doji, with the open and close above yesterday’s open to close range. This pattern is more typical of market tops and becomes more significant because of the low volume and range over the last four days.
How to use daily open and close prices
Today, I’d like to introduce another indicator. Last week, I talked about the differences in the way professionals and non-professionals trade. Non-professionals check their charts at night and place orders for the next day’s open; whereas professionals wait for the market trend to develop during the day and place their trades later. Therefore, comparing moves from yesterday’s close to today’s open with moves from today’s open to today’s close allows us to quantify professional and non-professional market activity.
The indicator I use to measure this is not easy to explain without going into some detail. Besides, I’d rather keep it to myself – for that reason I’ve called this indicator my Secret Weapon No. 2. It’s plotted on the chart above and labeled Secret 2. It’s an oscillator with a midpoint value of 50 and turning points typically above 100 and below 0.
This is one of my favorite indicators because it frequently turns before the market. Today, my Secret Weapon No. 2 indicator turned down from yesterday’s value of 80. I usually pay more attention to turns when they occur closer to 100 or 0, but combine this with today’s Doji candlestick pattern and the low volume and range over the last four days, and the turning point becomes more significant.
Use this indicator with care
Remember, combining a number of non-correlated market indicators and patterns will help you identify high probability turning points.
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