Friday, November 19, 2021

Expecting WMT Bullish Reversal - Update 2




Today's Daily chart is actually more interesting than it looks. First thing to notice is we opened gapped up. If Stochastics were high, this might be considered an Exhaustion Gap, which would be Bearish. However, Stochastics are still oversold, which gives a Bullish connotation to the gap up, because it shows enthusiastic buying at this price level.

Then you notice the candle went down and closed near its low, forming a Dark Cloud Cover candlestick pattern. This is a Bearish pattern, however given the oversold condition, the pattern's importance is greatly diminished.

Filling the gap that we made this morning is a good thing, in my opinion. Why?  Conventional wisdom says all gaps get filled, sooner or later. If you look at any heavily traded security, you'll see its true to a large extent. So, when a gap is made, and left open as price action continues away from it, I imagine there's a "gap fill pressure" that can slow down and reverse the price action to come back and fill the gap. That's just a fictitious mental construct on my part, but it adds a factor to my decision making. My point is that we won't have any "gap fill pressure" going forward since we immediately filled that gap today. 

Another thing to notice is we bounced off the 50 DMA (Daily Simple Moving Average). Looking backwards on the chart you can see WMT doesn't give the 50 DMA much respect, so I wouldn't give this much weight.

Also, today's candle body stayed within the 143.66 - 142.01 gap from Oct. 19th. This suggests to me that the fact we formed a down candle and a Dark Cloud Cover pattern may not be significant.

Finally, notice we didn't go below the bottom of our 3 supports and didn't make a new swing low. This is Bullish.

So, given all of the above, plus we're in a Bullish season of the year, and we have a Full Moon tonight (there is much research, including my own, that shows a high correlation between Full and New moons and the equity indexes), leads me to hold our Bullish position over the weekend.

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