LOCKIT Stock Trading Part 3

CA Inc daily chart

Finally, let’s look at the daily candlesticks chart over the last few months.

Figure 1.6: Analyzing the daily candlestick chart of CA Inc.

In figure 1.6, correction wave (4) consists out of an ABC correction. The C correction itself has a lower order wave with another (A)(B)(C) correction of which the (C) correction finally looks like an impulse wave.

We can see a number of signs indicating a possible end of this correction.
Price is reaching a second Fibonacci target at $22.4, drawn from the top of the B wave and the first correction in the down move. Also the first Fibonacci target at $25.0 was exactly touched by intermediate wave (A).

 

A falling pitchfork between B, (A) and 2 gives a medium term down moving channel. Price reaches again the median line of this pitchfork in the neighborhood of the second Fibonacci projection target.

Price now also touches the median line of a short term down moving pitchfork drawn between the wave points 2, 3 and 4 and this exactly on the second Fibonacci target.
Price is moving far away from its 50 and 200 days simple moving average. A move towards these averages is expected.

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The last two candles make up a bullish harami pattern, a candlestick bottom reversal pattern.

Let’s also have a look at the indicators on the daily chart of figure 1.7.

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Figure 1.7: Interpreting the indicators on the daily chart of CA Inc.

If this is going to be the turning point, we will see next a divergence in the SVAPO indicator.
The RSI indicator is below the lower standard deviation line in oversold territory.
And the BB%b indicator has already a divergence with price and is moving up from below the 10-reference line.

Clearly, a turning point can not be far away!

This is the second step in LOckit: Make use of the complete arsenal of  technical analysis tools to decide if opening a position now is the right thing to do.

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