A bearish pattern has developed and a SELL-IF alert is issued. Now, the task is to confirm the validity of this bearish pattern. We are posting daily the current confirmation status, but It is still your duty to do your homework. A good starting point would be to keep an eye on futures trading to get preliminary hints about the direction of the market. Related news, events, economic data, and the world stock markets should also be closely followed prior to and during the confirmation week.
There are three possible cases of confirmation. This week, you have to follow the sessions carefully to check if these cases will hold or not:
The week opens with a downward gap, signaling a bearish sentiment in the first case. Your benchmark will be the week's opening price. If the prices stay below the benchmark, sell your shares. Any black candlestick with a downward gap is a valid confirmation criterion.
In the second case, the week opens at a level, equal to or above the previous day’s close. The benchmark is that previous close. If prices during the session stay below the benchmark, sell your shares. Any black candlestick closing below the previous week’s close is the second confirmation criterion.
If, however, in both cases, the prices during the week start going over the benchmark avoid selling.
The third case of confirmation is rarely observed. The week opens with a big upward gap suggesting a very bullish week, and the week ends with a long black candlestick, but still closing above the previous week’s close. However, such a week satisfies the third confirmation criterion and the closing price of the long black candlestick is taken as the price of confirmation.
If one of the three confirmation criteria is not fulfilled, or in case of a white candlestick or a doji on the confirmation week, the SELL-IF alert remains valid, however, without confirmation and the three confirmation criteria are then sought in the following week. The only exception is the long white candlestick. Any long white candlestick following a SELL-IF alert makes the signal void and invalid.
The market looks strong on the short side. So you may continue to carry the existing short positions. If the SELL-IF is confirmed, new short sale positions may be considered.
