Heikin- Ashi Candles (H-A Candles) smooth out the rough edges and indicate if the patterns are continuing or they are just about to transition.
They are like regular candles but use averages. Something akin to the functioning of moving averages. I feel they are simple and effective. Why?
Let’s look at closing price on a H-A candle. It is average of high, low, open, close of the current time period. Isn’t that awesome! Why? because no matter what people say what they think, what the TV pundits think and say. No matter what – ALL INFORMATION IS IN THE PRICE. More so in the current world we live in – every information moves at speeds that was too much to even imagine for say Jesse Livermore – often quoted as the greatest speculator of all time.
Look what he says on page 11 of his own book under a pseudonym??
So let’s smooth all all fluctuations and say what is the average closing price for today. How is it doing with respect with last few days.
let’s look at S&P 500 Stocks Above 50-Day Average ($S5FI). From 90 % of S&P 500 stocks above their 50 days moving averages it has fallen down to 60%. Basically the stocks are losing steam and falling off. This is invaluable information. Why? the best biggest companies are not being supported by biggest institutional monies and hedge funds and Pension funds like The California Public Employees’ Retirement System (CalPERS) which has 300 plus billions in assets. Individual traders and speculators like you and me cannot match their dollars. We do not move the markets. We just follow the price.
As Jesse said – the tape does not concern itself with why and wherefore!
So last 3 weeks the stocks composing S&P 500 are falling off. So we do not enter into newer positions and take our profits. That is what i did in TQQQ and NQ yesterday. I closed all my positions and am sitting in cash now.
Now let us look at TQQQ – the triple NASDAQ 100. It went up 94.6 % since the start of the rally low on December 26th 2018 till close of the market price of Thursday March 21st. it gave up 14 % last two days. So we exited to preserve our profits. (all regular candle prices not smoothened H-A candle)
Now why is this last two days different from say March 7th and 8th 2019 when they were similar declines?
March 7th and 8th – the price decline was 5.3 % or 2.77 dollars. on 6th the volume is well below the 50 days SMA of the volume and on 7th the decline in price was accompanied with just about average volume. IBD still had market in confirmed uptrend.
From 8th to 21st of march the market was going up BUT S&P 500 Stocks Above 50-Day Average ($S5FI) BARELY BUDGED it held at 71 %!! TQQQ went up by 20 % but the best stocks did not move up!
On 21st March at the climatic top the volume was just above average in TQQQ – around 19 million. the 50 days Average volume was 17.8 million.
the 7.1 % decline in the last 2 days. were in volume of 33 and 26 millions! which is to say 83% more volume than average on Friday 22nd March 2019 and then 30 % more yesterday. IBD changed its market outlook on Friday to market under pressure.
Number 1 : price in the only true north star
Number 2 : Preserve your capital at all costs
Number 3 : Preserve your profits.
Market climbs the wall of worry going up in an escalator or slowing trudging up. It falls down like a rock or a free fall elevator.
lets look at the 5 min intraday chart.
7600 price seems to be a support. lets just wait and see.
Finally lets look at 5 days 60 Min H-A Candle chart of TQQQ.
look at the bottom pane the big green volume candle bar and the values for that particular hour. Volume was 300 % more from 2-3 pm the day of Wednesday March 20th 2019 price change was 56 to 59.66 – 6.5 % But then look at all the high volume red candles that followed the price decline.
So i am staying out of the market for now. Right from 3/22 and 3/25 10:00 am high volume price declines. So i get out of the way.
Happy patience and staying put for now!