Today’s massive Bearish Engulfing Candlestick engulfed every signal candlestick over the previous 20 days (14 trading sessions)… a clearly bearish technical event which strongly suggests that today’s selloff was more likely the start of a much deeper correction vs. brief blip on the road to new highs.
$NDX daily March 21st
As discussed in this video published earlier today, Bearish Engulfing Candles after an extended uptrend are fairly reliable indicators that a top may be in place, particularly if confirmed by additional downside (i.e.- red closes) in the next trading session or two. One simple & fairly effective strategy (mentioned in the trading room earlier as numerous engulfing candles on various indices & sectors were forming) is to establish or add to a short position with a stop placed not too far above today’s highs, as such a move back above today’s candles. Such a strategy provide a very small loss potential relative to the large gain potential, should the broad markets experience a decent correction in the coming days, weeks or even months.