Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stock prices paused their upward move today. Is this the pause that refreshes or the beginning of a new base and digestion of the prior up move, or the start of something more?

Today’s stock market action traced a “spinning top” on the daily chart today. This candlestick pattern is a sign of indecision.  Given the sprint of the last 10 days market action, this type of candlestick is not altogether unexpected.

Is this a buying opportunity?

For some clues on an answer, let’s take a look at the charts.

Stock prices on the weekly chart are still right on the upper trend line as was mentioned in yesterdays post. The cci20 and the PSAR readings are still in bullish mode so for now the weekly trend is still up.

The daily chart – where we can see the spinning top – is still showing a bullish trend with the cci20 well above the 100 line at almost 180. Prices are above the upper trend line and also the PSAR. Both are bullish indications. Trading volume did pull back from the prior day – a good sign – and to be expected.

Both the spinning top and trading volume are indications that the market is digesting it’s recent price increases.

The hourly chart I think is where the real clues are for a technical analysis of todays market.

The hourly chart turned negative after a brief run up in morning trading. This momentum leaked away during the day which left prices right at the lower trend line.

The trading strategy on the chart below shows “New longs from stock picks”, but we must remember that this chart is a technical analysis of the raw position of stock market prices on the weekly and daily charts. We must always look at the charts to define our timing strategy appropriately.

Trading Strategy:

If stock prices drop in morning trading tomorrow we may quickly find that prices drop below the hourly lower trend line. In this case you may want to watch to see how far they go.

Watch the hourly chart early and if it quickly trips into positive territory you may want to consider new long positions from our top stock picks.

But remember, tomorrow is Friday and sometimes a lot can be said for sitting on your hands on a Friday.