This was a break above resistance at 13,500.

Today’s chart snippet for the Toronto Stock Exchange S&P/TSX Composite Index shows the bullish white candlestick which closed at 13,551.  This was a close above the resistance level of 13,500.  View the  this full size customized chart which is provided by BigCharts.

Now, for the rally to continue, the tsx should open at or above the close of today and end higher tomorrow: in other words, another white candlestick. Bulls like tall white candlesticks with small shadows or none at all.

Talking about shadows, a candlestick with no lower shadow is said to have a shaven bottom. And you guessed it, a candlestick with no upper shadow is said to have a shaven head.  In a white candlestick, this is a very bullish pattern depending on the height. And in  a dark candlestick,  it is considered very negative.

All the market news is reflected in today’s candlestick: Egyptian protests, price of crude, copper at a all time high and the list goes on.  How the market indexes or individual equities react to both good and bad news is an important observation in technical analysis.  One guideline, if a stock does not sell-off on bad news then it is going up.

Technical analysis provides a graphical picture of the market and one of the most colorful components is the mighty candlestick: a light to illuminate the darkness at the end of the tunnel.

The January snippet to the right —  showing the bullish candlestick for today —  was snipped from this 6-month daily candlestick chart . This is a live chart that changes daily.  Refer to this live 6-month chart for a better overall view of the trend and the chart pattern.

So what are the components of a white bullish candlestick?

• It should be a relatively tall compared to other candlesticks in the chart pattern. This indicates a nice price move for the day: the  TSX closed at 13,465.75, up 206.12 points, or 1.6 per cent.
• It should open close to the low of the day and close near the high of the day as indicated by small shadows (wicks). In other words, buyers came in at the open and kept buying right to the top.  The price movement was nearly straight up for the day with very little selling pressure.

The energy and materials stocks were the big movers today.  Traders saw support developing around the 13,300 level and went for the ride.  But, unless there is a break above 13,500; the TSX is still in a consolidation (sideways) trading range.  Will there be a follow-through on the buying tomorrow? Or will the day traders start selling at the 13,500 level?

For an investor with a longer term perspective, I would not buy into the market unless there is a confirmed close above 13,500. Then you maybe able to ride another upward leg in the index.