📈82% of the Time this works..

One of the easiest lessons to learn in stock trading is to cut losses. Its also one of the hardest to follow. We hold onto the trade longer than we should and usually exit when it moves strongly against us instead of immediately. This phenomenon is done by the masses. This leads to old trading adage “Failed patterns move fast.” The U.S. dollar has been selling down and this has led to a significant lift in the S&P500”. This may be coming to an end and can effect the Index. Below is the U.S. dollar (DXY). We bounced hard off the support level once we failed to break. Traders scrambled to cover and that leads to more natural buyers stepping in.

This led to a massive squeeze in the dollar which involved a pattern know as “three soldiers.” Three soldiers is a bullish candlestick pattern that is used to predict the reversal of the current downtrend. The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle's body and a close that exceeds the previous candle's high. These candlesticks should not have very long wicks. You can see examples of the three soldiers bullish reversal pattern below. Examples are circled in blue

What makes this pattern significant is that the probability of it predicting a reversal is very high. According to Tom Bulkowski, who wrote what many consider the Candlestick pattern bible, the pattern has an 82% probability rate of predicting a bullish reversal. It’s actually ranked as #3 best patterns out of the 103 Bulkowski classified. The magnitude of the move can vary greatly but it is worth paying attention to considering the high win rate. As we discussed in previous newsletters the SP500(green) bottomed with the U.S. dollar (DXY) topped. Any bullish change in the dollar can affect the index.

For what stocks are moving today after earnings watch the video below. Pay close attention to the comments about Pinterest stock symbol PINS.

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