TriStar Doji on SP500 August 27

Aug 27, 2009: 10:30 AM CST

I’ve been mentioning over the week that the S&P 500 (and other US Stock Market Indexes) were forming dojis at their upper Bollinger Band lines on the daily charts.

As of Wednesday, we formed the dreaded “Tri-Star Doji” pattern which was last seen at the July 2009 lows prior to the 150 point rally in the S&P 500 into August.

Let’s take a quick mid-day Thursday look at this development to see if the bearish signal will hold.

See my prior two post on this pattern for more information:

“Dojis at the Highs – a Look at DIA, QQQQ, and SPY”

This is a quick mid-day post, so let’s be sure to take a look at how the market closes today for confirmation, but for now, this is a bearish non-confirmation of higher prices as we challenge the upper Bollinger Band on three doji patterns, as well as a negative volume and momentum divergence.

At ThePatternSite.com, Thomas Bulkowski describes the Tri-Star Doji (page link) by saying “The bearish tri-star candlestick is an unusual [pattern]… [which] has a frequency rank of 77 out of 103 candle patterns, so it will be hard to find.  And when you do find it, do not look for outstanding performance, either.”

In his testing, Bulkowski found that the “Bearish Tri-Star” produced a downward move 52% of the time… which just above ‘random chance.’

Still no guarantee of a reversal, but odds seem overwhelming to favor a downside move to challenge the 1,000 level at a minimum to see if that can hold as support.

Stay tuned!

Corey Rosenbloom, CMT

14 Comments

14 Responses to “TriStar Doji on SP500 August 27”

  1. dpstrctr Says:

    Corey, would you please define for us what your lower oscillator there is and its input values? Is this the same one you use intraday?
    Also, what period is the red ema shown there?
    Looks like it could very well be a quad-star today.
    Thanks!

  2. Corey Rosenbloom, CMT Says:

    Good point! As of now, it looks like we could have a bullish close, or if we pullback, a quad-doji (not sure if that is a pattern or not!).

    It's the 3/10 Oscillator – info here:

    http://blog.afraidtotrade.com/how-do-i-create-t

    The red line is the 200 period SMA.

    I use these indicators as shown above on all timeframes.

    Thanks!

  3. Dan Says:

    It looks like the end of the month positive bias is kicking in. Those bulls are sure loving pounding the bears. LOL.

  4. Corey Rosenbloom, CMT Says:

    I've never seen so many failed sell signals – from non-confirmations to EMA breaks – you name it.

    Doesn't phase the bulls.

    They're like … well.. bulls in a china shop.

  5. dpstrctr Says:

    thanks Corey –I'm new to the site and have only been trading since January so I appreciate you taking the time to answer.

  6. dpstrctr Says:

    What are your input values for the bollinger bands you're using?
    Thanks!

  7. Corey Rosenbloom, CMT Says:

    No problem! Welcome to the site – glad to have you as a reader.

    I'm using the standard 20 period 2 st.dev settings (default) on the BBs – no frills there.

    All the best.

  8. scrillagorilla Says:

    “As of Wednesday, we formed the dreaded “Tri-Star Doji” pattern which was last seen at the July 2009 lows prior to the 150 point rally in the S&P 500 into August.

    Let’s take a quick mid-day Thursday look at this development to see if the bearish signal will hold….

    “In his testing, Bulkowski found that the “Bearish Tri-Star” produced a downward move 52% of the time… which just above ‘random chance.’”

    So basically, this “dreaded” “bearish signal” has virtually NO predictive value. At 52% “accuracy” it is not “just above random chance”, it IS random chance. Sounds neither “dreaded” nor “bearish” to me.

  9. Corey Rosenbloom, CMT Says:

    We'll see how it plays out – but I try to add a little color to the posts so as not to be too boring with the material.

  10. Corey Rosenbloom, CMT Says:

    Tri-Star Bullish Doji met target 60% of the time so perhaps its a function of the market's upward bias/drift.

  11. tristar Says:

    According to the definition of a tri-star doji, I don't believe that we have one here…

    http://hotcandlestick.com/directory/Bearish%20T

    it needs 1. three doji candles, (we have that) and 2. the second candle has to gap above the first and third candle. (that is NOT present)

  12. Dan Says:

    Looks like we are going to get another bearish touch today but Monday is the last day of the month. Mutual Funds have to dupe their clients and accumulate the hot stocks at high prices.

  13. Corey Rosenbloom, CMT Says:

    Agreed.

    It's the way of the business it seems. I've heard the term “froth” or “trash rising to the top” in terms of stocks over the last week… interesting.

    I'm officially calling Guinness if we get a 6th doji in a row.

  14. Corey Rosenbloom, CMT Says:

    Agreed.

    It's the way of the business it seems. I've heard the term “froth” or “trash rising to the top” in terms of stocks over the last week… interesting.

    I'm officially calling Guinness if we get a 6th doji in a row.