Hi Shoppers,
I haven’t given a candle lesson here in a while.
That changes now!
Let’s talk about my favorite candle formation: the doji.
The doji is my favorite because it can be found at the top of an uptrend and at the bottom of a downtrend.
It signals the possibility of a change in that trend.
It looks like this:
The doji has a very small or nonexistent real body (the red or green part) and an upper shadow and a lower shadow (white lines).
The real body is created by the difference between the opening and closing price of the session. It can be red or green.
The upper shadow is formed by the high of the session and the lower by the low of the session.
The doji looks this way because it represents the buyers and the sellers in the market equally, meaning neither side has taken over.
So, when found at the top of an uptrend or the bottom of a downtrend, the doji is signaling doubt in continuing that same direction causing people to not add to their positions and/or cover their positions, stopping that trend.
Most importantly, if you spot a doji, be sure to wait for the confirmation the following day.
A confirmation is the underlying opening and trading in the direction of the reversal. Also, wait for the underlying to trade for at least an hour in that direction.
If you’ve been watching the market, you know what has happened to Walmart (Ticker: WMT).
Guess what?
Friday’s candle is looking like a doji to me.
This is what I plan on doing if it pans out.
Watch for Falling Dojis
WMT has gotten hammered since earnings.
It has traded down from its high on April 21 (a doji) of $160.77 down to the low on Friday of $117.27.
That’s 27%!
Tomorrow, I will be watching for WMT to open above $119.65 and trades higher in the first two hours of the day.
If this happens, I will be a buyer of the May 27 120-strike calls:
I would pay $1.65 to $1.70 for these.
I am looking for a quick move up and be in and out of these.
Be sure to watch the overall market, also, as we have been riding out historically insane moves.
Trade Review
In the last Profits in Pumps, I was looking for Nvidia (Ticker: NVDA) to trade over $182. It never happened, so no trade was made.
Thanks for Reading … See You Next Tuesday.
Licia Leslie