If there is one chart pattern you should know, it’s the doji candlestick.
Dojis were developed more than 1,000 years ago by traders on the Japanese rice markets. They act as powerful reversal signals, like stock ninjas.
A candlestick is a visual representation of a trading session. You have an open, a close, a high price, and a low price.
If the candlestick is white, it closed higher than it opened. If it is red, it closed lower than it opened. The vertical legs represent the highs and lows.
A doji candlestick, however, is black, meaning it closed at or near where it opened.
In other words, dojis are formed when the candlestick opens and closes at the same level, implying the fight between the bulls and the bears is at loggerheads. Dojis signal turning points.
They look like a cross. Think of them as flags planted at the top of a mountain.
On Wednesday, we got one on top of the Nasdaq.
That morning, I sent out an options recommendation for my service Options Trading Pit.
Here it is:
The QQQs are set to fall.
Triple Q is the ETF trading symbol that tracks the NASDAQ 100. It is the most traded ETF in the world.
As you can tell by this chart, we have had eight up days in a row followed by a doji at the end of a trend.
This is as clear a sell signal as you are going to get under heaven.
Buy the QQQ March 2014 88.00 puts (QQQ140322P00088000). They are now trading at $0.82. We will look to sell next week. Do not hold these after March 1.
Lock and load,
Options Trading Pit
As I write this on Wednesday afternoon, that QQQ put is up 24.39%. Using this simple method, I’ve made readers like you money for nine of my last 10 trades, with winners such as 185% on Westport calls, 106% on Manchester United Calls, and 80% on Citrix calls.
My current closed 2014 portfolio is up 38%. The average time held is less than two weeks. This means you can roll over your winners and multiply your gains.
If you aren’t making 38% gains every two weeks, I can only assume you hate money.
Join us, and put the power of the doji to work for you.
All the best,