Shooting star candlestick cannot pierce 13,500

TSX weekly candlestick chart showing congestion areas

TSX weekly chart - Jan 28, 2011

The most important point of technical analysis is to determine the trend for an index or equity.

This post will summarize the price action for the TSX over the past week. You can trade online using the graphical representation of candlestick charts.

The snippet of the first chart to the right, taken from this 3-year weekly chart of the TSX, reveals that the major trend (over six months)  is up.  You can draw a trend line under the lows to define the trend, but in this case the 50-day moving average is a good trend line. The snippet also shows two congestion areas on the weekly candlestick chart for the TSX: prices never go straight up but advance  like the steps in a staircase.

Now, I will focus the analysis on the daily candlestick chart to determine the intermediate trend (three weeks to three months) and the near-term trend (less than two or three weeks) for the TSX.

TSX daily chart for January 28, 2011 showing a spinning top candlestick

TSX Daily Chart - Jan 28, 2011

The snippet of the second chart taken from this 6-month customized daily chart of the index focuses on the January congestion zone which is highlighted in the yellow box on the first chart.

Trend can go three ways: up, down and sideways.  And, any index or equity can spend a lot of time trading sideways in a lateral trading range. The near-term trend for the index is sideways with support at 13,200 and resistance at 13,500.

Let’s focus on the price action  for the TSX over the past week of January 24-28. You can review posts  for some notes on the  daily action.

Daily chart of the TSX showing shooting star candlestick

Daily Chart - TSX

On Tuesday, the shadow of the spinning top bounced off support at 13,200. On Wednesday, the bullish candlestick was very encouraging. On Thursday, there was no follow through on the bullish candlestick and the spinning top spelled indecision with a feeble attempt to break 13, 500: this was not encouraging. Then, on Friday, the shooting star flamed out on its attempt at 13, 500.

This congestion zone must be monitored carefully  as the rally that started in August looks a little extended.  A close below 13,200 would be taken very seriously by most traders.

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