The first step in technical analysis is determining the overall trend for the market.
Take a look at the 3 year weekly candlestick chart (each candlestick shows the price range for the week) and the 1 year daily candlestick chart (each candlestick shows the price range for each day) for the Canadian stock market. The overall trend is up on both these charts. Since September, the 50-day moving average has defined the trend.
Yesterday, the index broke 13,500 which is the white candlestick in the yellow circle on the chart snippet to the right. The red candlestick in the circle is today’s negative move — opened above 13,500 and closed below 13, 500. The two candlestick pattern in the yellow circle is a bearish engulfing pattern where the market opens — the red candlestick — above the previous white candlestick and then closes below the white candlestick: it has negative implications. The bearish engulfing pattern is in the broad category of reversal patterns.
More analysis to come on this post — candlestick combination highlighted in the circle and the moving averages.