A Japanese Candlestick Pattern May be Indication Markets Have Found Support

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
May 5th, 2023

5 mins read

Yesterday’s education provided analysis of the US equities markets, represented by use of the SPDR S&P 500 ETF Trust (SPY).  This is an ETF that replicates returns of the S&P 500 index.

What was taught was the observation SPY was testing a previous pivot low, which could either turn in to a double bottom support or breach that pivot low and signal a further slide in the SPY was imminent.

The piece yesterday ended with a comment that a good thing for the bulls would be if SPY bounces higher off this support.

Today and thus far it has.

Bullish Kicker

Figure 1: Bullish Kicker on 100-day Candle Chart on SPY
Figure 1: Bullish Kicker on 100-day Candle Chart on SPY

Of course, the day has to complete and anything an happen in the last hour or two of a trading day, but right now Figure 1 shows the most recent two trading days, today and yesterday forming a Bullish Kicker Pattern.

Feel free to look up a definition of the bullish kicker pattern wherever you like.

You will read that it tends to happen at the end or bottom of a significant down trend.

We aren’t seeing a significant down trend on the chart, but it does show up after a bearish day.  It is often times looked at as a western technical pattern called a gap, (the Japanese call a gap a ‘window’).

You may also find dialogue that states a bullish kicker is comprised of a large bullish candlestick, that’s preceded by a gap to the upside and a bearish candle.

One can see in Figure 1 there is a bullish day, (today), a gap up from yesterday’s close to today’s open, and prior to that a bearish day – in fact three prior bearish days.

Where the Reversal Pattern Happens Just as Important as the Pattern Itself

A Bullish Kicker pattern can happen at the top of a trend, but it is deemed more important to us should it happen after the end of a downtrend and or at a support level.

We see $405 as a price support that it has now tested twice and did not break down or close below that price point.

This gives us reason to anticipate a further, higher price move in SPY.

From a technical standpoint we also must assess our risk in any trade / investment.

The lows of the two candle days that formed at $405 support would then be a spot on the chart that one could consider their technical stop.  If SPY closes below that/those we could be back in the position of expecting a price move lower and we go back to the fib retracement levels to look for target to the downside, potential new support.

As for a price target higher from here?  We are going to anticipate a move higher to the prior double top high at $415 or a bit above as a possibility.

It’s quite possible we will hear dialogue from many a financial pundit on the financial news networks calling any kind of sustained upside move a ‘rally that should be sold’ or one that might not be sustained.

They may consider that resistance level as where and when they sell again.  We can’t speak for ‘them’ but will see how price reacts at that resistance if and when it comes.

Are There Individual Stocks with the Same Reversal Pattern as SPY?

My tools, www.tomsoptiontools.com has the means to run scans/searches on many lists.  They can run a variety of different scans on these various lists based on many different technical indicators.

And Yes, Japanese Candlesticks can be searched for.

Below is a list of a search run on the S&P 500 looking for the Bullish Kicker pattern on the stocks in that index.

Figure 2: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 1
Figure 2: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 1
Figure 3: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 2
Figure 3: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 2
Figure 4: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 3
Figure 4: Stocks in S&P 500 with Bullish Kicker Patterns Now, Part 3

It is understandable to us there would be quite a number of stocks with Bullish Kicker patterns.

The market had a good-sized sell off yesterday and that looks to have brought investors in to the market to either pick up some of their favorites stocks deemed on sale and/or cost average their holdings price to a lower price level.

In either case, we offer a couple of things to pay attention to.

  1. If one is to consider trading any of these make sure the Bullish Kicker is happening at a support are for that security and 
  2. Consider the lows of that support a technical support if you are working a trade on it, (as for an investment one may consider it a long-term investment and may not need to be so tight with their technical analysis).

As always, if one wishes to pursue any of these securities based on this Bullish Kicker pattern for trade or investment discuss the suitability to one’s portfolio with one’s broker.

App: Toms Option Tools

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