Bullish Three Outside Up Candlestick

Bullish three outside up is a highly reliable candlestick bullish reversal pattern which indicate the end of an existing downtrend and the beginning of new downtrend. It is a three candlestick formation, which is regarded as the confirmation of bullish engulfing pattern, because the first two candlesticks forms the bullish engulfing pattern, and the third candlestick confirms the trend change.


Requirements of bullish three outside up candlestick pattern include,

• The pattern should form at the bottom of an established downtrend.
• The first candlestick is a bearish (black or colored) candlestick.
• On second-day, there should be a long bullish (white or colorless) candlestick closing above the first candlestick, the real-body of which totally engulf the real-body of first day candlestick. Thus forming the bullish engulfing pattern.
• The third day is also a bullish day closing higher than second day.

Bullish three outside up formation occurs when bulls take control of the market after a significant downtrend. Two consecutive bullish days with higher closes than first-day candlestick is a clear indication of a bullish trend.

Bullish three outside up candlestick is a highly reliable, reliable than bullish engulfing pattern. The reliability increases with increase in trading volume and real-bodies of second and third day candlesticks. As three outside up is a confirmation of other pattern, most traders don't look for other confirmations. The suggested confirmations are higher close, a gap up or bullish candlestick on day four.

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Linear Regression Trendline & Indicator

Linear regression trendline is a simple statistical indicator to predict future prices/trends based on past prices; or to extend past prices to the future. It is an indicator based on linear regression. Linear regression trendline is plotted as a straight line through the past price chart using the least squares method. This helps in minimizing the distance between prices and the trendline.

The idea behind linear regression trendline is future prices go inline with current prices. Most logical way that one can predict tomorrow’s price is – close to today’s price. For example, if the price is in upward trend, then tomorrow’s closing price (usually) can be the point of linear regression trendline which is above and close to today’s closing price. Linear regression trendline is considered as the ‘equilibrium price’. Price movements above or below the trendline can be a buying/selling opportunity. Price deviations from trendline are considered short-lived and the price is expected to return to the trendline.

Linear regression indicator or LRI plots multiple linear regression trendlines. It acts as a moving average of linear regression trendlines. But there are two key differences, unlike moving averages it do not have much delay and it actually forecasts future trends.

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Types of Exchange Traded Funds

Exchange Traded Funds (ETFs) themselves has great variety and diversity. They can be classified on many basis such as index they following, their management, asset allocation, etc. Here are some popular ETF types.

1. Broad Index ETFs – These are the most diversified ETFs with respect to their composition. Examples include ETFs tracking S&P 500, NYSE, AMEX, etc. One can also find broad index ETFs which track international indexes like Japan Nikkie. Symbols include SPY, DIA and QQQQ.
2. Market sector ETFs – These are ETFs tracking specific market sectors like finance, technology, industrial, etc. They are less diversified compared to broad index ETFs but are also very liquid. Symbols begin with AX.
3. Business sector ETFs – These ETFs track specific segments like biotechnology, medical services, utilities, semiconductors, etc. They are less liquid than market sector ETFs.
4. International Regional ETFs – These are ETFs which track indexes of specific regions like Asian, European and Latin American markets. There are also ETFs which has mix of regions like Asian-European mix ETFs and Emerging market ETFs.
5. Country specific ETFs – These are ETFs having a portfolio comprised of large cap stocks of a stock market of a specific country; often a developed or emerging country like Canada, China, Brazil or India.
6. Commodity Specific ETFs – These are ETFs which track either specific commodities or stock of companies related to a commodity. Some popular examples are gold ETFs, grain ETFs, and financial commodity ETFs.
7. Currency specific ETFs – These are ETFs which track one or more currencies or track the price differences of currency pairs. Example include ETFs which track G8 currencies. Currency ETFs tend to be more liquid than stock ETFs.
8. Smart of Leveraged ETFs – These are ETFs which implement some sophisticated trading strategies to magnify the returns from the market. They tend to be more risky and costly than traditional ETFs.
9. Bond ETFs – These are ETFs which track fixed-income securities like treasury and corporate bonds. They tend to be of 'low-risk low-return' nature.
10. Entire World ETFs – These are ETFs which track most of the world markets. Vanguard Total Market Index Viper is a good example.

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Weekly Stock Market Newsletter, June 29, 2009

The Week Ahead: The sharp rise in personal savings has the stock market fearing consumers are socking away dollars for a long recession. The April Case-Shiller Home Price Index is released on Tuesday. The auto sales report and construction spending numbers are due by Wednesday. The employment report for the month of June will be reported a day earlier than normal on Thursday due to the markets being closed on Friday ahead of the July 4th holiday.

Stocks to Watch: Specialty retailer Chicos Fas Inc. (CHS) may have ended a long but substantial rise in its equity value from last November as the company gave a guarded outlook at an analyst meeting. Sanofi-Aventis (SNY) stock continued a steep sell off after concerns about the safety of its diabetes drug Lantus and its possible link to cancer. Robbins & Myers (RBN) stock fell after Q3 earnings were substantially lower than year ago levels with a 29% drop in sales and a lowered 2009 outlook.

Special Note: One of the key statistics in confirming bull market rallies is an expansion in volume as investors gain confidence as the market advances. Conversely, what the current market is showing is a persistent contraction in volume after peaking on April 2. This loss of upside momentum is more evidence of a bear market rally that is maturing as each day passes. More over, waning upside breadth between rising versus falling share prices adds to this argument.

Commentary Provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Basics of Ticker Symbols

Ticker symbols are the identifications of companies on a exchange listed. They are not limited to stock exchanges; they are there for almost all financial instruments which are publicly traded. Ticker symbols derive their name from old noisy machines used by brokers for received buy and sell orders, which make ticking sounds.

Different exchanges have different rules for ticker symbols. While New York Stock Exchange (NYSE) has symbols with 1 to 3 characters (eg: T for AT&T and VZ for Verizon), NASDAQ has 4 or 5 letter symbols (eg: MSFT for Microsoft). It is common to have different symbols for same company stocks. Usually it is the exchange which provides a symbol (at random) to a newly listed stock, or the company can suggest the market to offer a particular symbol (which reflects their name/brand) available for its company stocks (eg: JAVA for Sun Microsystems and GOLD for Randgold Resources). Companies can also contract the exchange to change its ticker symbol if necessary.

Sometimes additional letters are added to ticker symbols of listed stocks to indicate some specific information. Nasdaq adds A and B to class A and B stocks respectively, D for new listed stocks, E if the company not filed it forms with SEC, Q if the company undergoing bankruptcy, F for foreign stocks, Y for ADRs, C for temporary qualification exceptions, etc. This helps the traders to identify the status of stocks quickly.

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Bearish Three Inside Down Pattern

Three inside down is a bearish trend-reversal pattern indicating the end of an uptrend and start of a new downtrend. It is a three candlestick pattern which is the ‘confirmation of bearish harami candlestick formation’. The first two day candlesticks of bearish three inside down pattern forms bearish harami pattern, and the third day candlesticks, which is bearish, confirms the trend change.


The requirements of a bearish three inside down pattern include,

• The pattern should form at the top of a significant uptrend.
• The first day is a bullish day characterized by a long bullish (white/colorless) candlestick indicating continuation of existing trend.
• The second day market opens a gap below first day candlestick (exception: forex) and the small real-bodied bearish (black/colored) candlestick closes with in the real-body of first day candlestick, forming the bearish harami.
• Third day is also a bearish day which closes below the real-body of first day candlestick.

The confirmation of bearish harami pattern on third day makes it clear that bears are now controlling the market and prices are expected to go down. The formation mostly occurs at mornings.

Bearish three inside down pattern is considered highly reliable. Reliability of pattern increases with increase in real-body and trading volume on day three. Because it is the confirmation of other pattern, no more confirmation is suggested.

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Displaced Moving Average or DMA

Displaced moving average or DMA is a very useful moving average (MA) tool, which can be adjusted both forward and backward to get specific results. DMA is created by displacing the simple moving average by a certain number of intervals; which can either positive or negative. OR DMA is created by displacing the center of the moving average to left (backward) or right (forward).

When the displaced moving average is displaced by a negative value, it becomes a lagging indicator (than original moving average) and when it is displaced by a positive value, it becomes a leading indicator. As a general rule, making DMA a lagging tool helps long-term traders to ignore excess noise (as a result of daily trading) and making DMA a leading tool helps short-term traders to find small price trends.

In displaced moving average, by displacing the center of MA, traders can reduce the noise in the moving average. Traders use displaced moving averages for various purposes.

1. Long-term traders and investors use DMA with negative values to de-trend the charts to find out market cycles.
2. Short-term traders use DMA with positive values to make it a leading indicator to find trends and trend-changes faster.
3. Traders can also use DMA to generate buy and sell signals with respect to the crossing of DMA by price trends.

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