If you have been following the stock market, you will realize that we had the best January for the S&P and Dow since a very long time. You can read more about this in Fox's Business article titled S&P 500 posts best January since '87, Dow best since '89.
Why did it happen?
Well, we will look at the technical reasons in this article. And it is thanks to the Weekly Bottoming Tail that the stock market has been able to climb up higher.
I remember mentioning to my chat group that all 3 major indexes' etf were making a weekly bottoming tail and therefore we could expect some bullishness.
For those who do not know what a bottoming tail is, it is a Candlestick pattern that has a small body with a long tail at the bottom. At one point in time the market sold off only to recover and close near the highs.
The chart above is the weekly chart of the S&P 500.
It had a V shape recovery. The drop was very scary but it has now recovered most of the drop. Notice how a weekly bottoming tail formed?
The presence of a bottoming tail told us that the market was rejecting to go lower. In other words it means it wants to go higher.
Bottoming tails can be very powerful indicators of reversal. Take a look at the double weekly bottoming tail back in May 2018.
The lesson for us here is this : After the market drops too much and you see a bottoming tail appearing in the weekly charts, you should be aware that a bullish reversal might be around the corner.
And you should analyze things properly and try to determine whether the market will go back up.
Never underestimate the power of this simple Japanese Candlestick chart.
Not only did a weekly bottoming tail happen in the S&P 500, the Dow Jones also acted the same way. This is a double confirmation that the main index as well as the broader index is thinking the same way.
They refuse to go down. They are not affected by the bears in the camp. Which is why they went back up and close higher at the end of the week to form a weekly bullish bottoming tail.
If you like to know how to profit from this phenomenon do check out The Weekly Bottoming Tail Trading Strategy.
Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com
Charts with the investing.com logo are courtesy of Investing.com powered by Trading View
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