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CANDLESTICK CHARTING


West Marine Moves On With Bullish Mood

08/09/07 02:18:05 PM
by Chaitali Mohile

Downtrend ends for West Marine, with three white soldiers formed on three black days for US indexes.



Security:   WMAR
Position:   Hold

Three white soldiers is a bullish reversal candlestick pattern. It implies an end to the downtrend. Three white soldiers is the bullish counterpart of three black crows. If the price opens near the middle of the previous body, it gives best bullish indications. A three white soldiers pattern formed on the chart of West Marine after an extended down move; in fact, the stock was underperforming since 2004. But the current move of this stock is noticeable. When the entire US market was getting hammered, WMAR began its upward journey and remained bullish for three consecutive days. This strengthens the bullish rally on this stock.

In addition, a three white soldiers pattern is a strong bullish pattern by itself. The fourth bullish candle was formed along with the entire market undergoing a partial bullish rally. This fueled the strength to violate the 200-day moving average resistance. The fourth bullish candle is accompanied by heavy volume compared to the previous three white soldiers. This points the trader's psychology toward the entire market movement. As a relief rally was witnessed by the entire market, watchful traders at first poured in the fresh bullish rally of WMAR.

FIGURE 1: WMAR, DAILY. Three white soldiers and a fourth bullish candle crossed major 200-day MA resistance. The ADX (14) and RSI (14) supports the bullish rally.
Graphic provided by: StockCharts.com.
 
The average directional movement index (ADX)(14) was very tricky in the last two to three months, with selling pressure ruling marginally (Figure 1). Meanwhile, the price also witnessed a range-bound move as the positive directional index (+DI) and negative directional index (-DI) moved closer with the ADX (14) moved around 20. But as the price surged from the bottom at $12.5 +DI moved vertically upward, conquering the rally; the ADX (14) now is indicating a developing uptrend. The relative strength index (RSI)(14) also indicates the bullish strength in the rally.


In Figure 2, WMAR had various support & resistance areas to carry a bullish rally. The resistance turned down quickly. The relative strength index (RSI)(14) at 52 indicates fresh buying levels. The ADX (14) shows increased buying pressure, so the trend is being grabbed by bulls.

FIGURE 2: WMAR, WEEKLY. +DI steeply moved above -DI, capturing the trend. The RSI (14) also opened a fresh buying level.
Graphic provided by: StockCharts.com.
 
Thus, with three white soldiers on Figure 1, the fresh bullish trend is set in WMAR. The weekly chart supports the bullish rally, and fresh long trades are opened with minimum level of $18.5 first.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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