What is the significance of today’s candle on the NAZ?

Today the NAZ (COMPQ) opened and closed entirely outside of it’s upper bollinger band, see upper most right candle in Figure 1, but closed below it’s open. With the prior large white candle, today could be interpreted as a “star position” or “spinning top”. After a long advance or long white candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend. (source: www.stockcharts.com).

Figure 1: today and the past 2 months with the (long) advance since the mid-February low 

compq BB

The question thus is; what does this candle stick in relations to the upper Bollinger Band mean, and what could prior market action tell us. For that we went back to the beginning of this bull market and looked at exactly similar setups: a black bodied spinning top outside the upper Bollinger band.

We found 3 -arguably 6- similar occasions all shown below:

  • (December 28, 2009)
  • (March 14, 2012)
  • October 21, 2013
  • December 30, 2014
  • April 24, 2015
  • (June 23, 2015)

The occasions between parentheses are because those are not really spinning tops, as the lower wig of the candle stick was rather long. But the candle sticks have black bodies and opened and closed outside the upper Band. The charts at the end of this post show each occasion. So how did the market fair?

  • (Down 1% 3 days later, max up 1% 9 days later, max down 8.7% 1 month later.)
  • (Max up 4.6% 9 days later, max down 2.6% month and a half later.)
  • Max down 1% 3 days later, max up 1% 7 days later, max down 2% 14 days later
  • Max down 6% half a month later
  • Max down 5% 8 days later (after a higher open and spike higher the next day)
  • (Max down 5% 10 days later)

Hence, all set ups have price down after such a candle within a matter of days using the current market .

compq bb8compq bb7compq bb5compq bb3compq BB2

 

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