What is the Strongest Candlestick Signal? The Kicker Signal!
What is the strongest candlestick signal? The Kicker signal! It demonstrates a severe change an investor sentiment. A good rule of thumb is that if an investor sees a Kicker signal, he/she should go long or short depending on whether it is a Bullish Kicker or a Bearish Kicker.And that is exactly what we saw happen today in the NASDAQ index. The Bearish Kicker signal, especially with the stochastics in the overbought area, indicates that we want to be out of our long positions, either sitting in cash or shorting the market.
KICKER SIGNAL
( Keri Ashi )
Description
The Kicker signal is the most powerful signal of all. It works equally well in both directions. Its relevance is magnified when occurring in the overbought or oversold area. It is formed by two candles. The first candle opens and moves in the direction of the current trend. The second candle opens at the same open of the previous day, a gap open, and heads in the opposite direction of the previous day’s candle. The bodies of the candles are opposite colors. This formation is indicative of a dramatic change in investor sentiment. The candlesticks visually depict the magnitude of the change.
Criteria
- The first day’s open and the second day’s open are the same. The price movement is in opposite directions from the opening price.
- The trend has no relevance in a Kicker situation.
- The signal is usually formed by surprise news before or after market hours.
- The price never retraces into the previous day's trading range.
- The longer the candles, the more dramatic the price reversal.
- Opening from yesterday’s close to yesterday’s open already is a gap. However, gapping away from the previous day’s open further enhances the reversal.
The Kicker signal demonstrates a dramatic change in the investor sentiment. Something has occurred to violently change the direction of the price. Usually a surprise news item is the cause of this type of move. The signal illustrates such a change in the current direction that the new direction will persist with strength for a good while.
There is one caveat to this signal. If the next day prices gap back the other way, liquidate the trade immediately. This does not happen very often, but when it does, get out immediately.
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Market Direction – With the NASDAQ producing a Kicker signal to the downside and the Dow in a severe sell-off, the probabilities point to being short in this market. Crude Oil prices spiked up another $1.50 today. The fear of much higher oil prices is now affecting the market conditions. Crude Oil is now trading at new contract highs.
The Federal Reserve raised interest rates by a quarter of a point yesterday. It is not unusual to see a rally the same day as the announcement, then a turnaround the next day. Does this mean the turnaround is going to last for a while? The Kicker signal today in the NASDAQ is a very good indication that it will.
The weakness shown by the Kicker signal in the NASDAQ, with stochastics in the overbought area, should at least have the NASDAQ test the 50-day moving average. However, the strength of the Kicker signal could start a downtrend that could test the recent lows. The stochastics in both the NASDAQ and the Dow indicate we should have a few days, at least, to the downside.
The semiconductors tried to bounce up in the last couple of days but have now failed. As seen in our daily follow-ups, these positions were closed out on the weak open today. Once again, the advantage of the Candlestick signals is that they reveal opportune times to get into stocks as well as get out of them. The weak signals in the semiconductor stocks, over the past day or two, made it clear that the sellers were starting to come back into these stocks. Today, SOX pulled back with a Bearish Engulfing signal to the 50-day moving average with stochastics in the overbought area starting to turn down. This could also lead to a test of the recent lows.
Entry Points - Each day our recommendations include the conditions that should occur before entering a trade. For example, AGI and AFCI, on Wednesday, were recommended but with the caveat of buying on strength. In both of these cases, they opened lower than Tuesday’s close. The market conditions, showing selling from the open Wednesday, would have had us waiting to see if there was any strength. It is important to analyze what the market conditions are when entering a trade. Please read all of the stipulations in the recommendations. Not entering a trade when conditions are not correct will keep your funds from being placed in trades that are not working. Those funds remain available to be placed in better positions. Read the recommendation carefully.
SOX, Semiconductor Index
The retailing stocks have been acting weak for the past week. This pullback in the market has added to their downside move. During these indecisive periods of the market, it is wise to have both long and short positions in the portfolio. For the specific purpose of being able to shift the portfolio quickly once the trend is revealed coming out of that indecisive period. This makes the shift much more manageable.
Note how the selling came into stocks such as Children’s Palace a little over a week ago. The stochastics turning down and seeing consistent selling signals made this a prime candidate as a short position when the market indexes were in an iffy stage.
