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Market Comments for July 17, 2014

 

Yesterday the market gapped up a significant amount but failed to follow through on its gap to a new high. Instead it went mostly sideways and closed with a narrow range red bar. This red bar however was still sitting on top of the prior days trading range and still remains an overall bullish pattern. When judging the effect of red bar, one of the key issues is the encroachment into the prior day’s bar. Red is not always bearish in this case, especially if the entire red bar is sitting on top of the prior days trading range. The size the red bar, the encroachment, and the overall chart pattern all factor into what is bullish or bearish in such a case.

While the market is certainly capable of taking a rest at any time, especially since it is still five days up and extended on the weekly, the strong stage II rally is still intact and is the most likely path until proven wrong.