Outside Reversal Day Up (ORDU)

Overnight stock index futures - as measured by the ES futures - made a higher high. Then, during the cash trading session today, we counted a potential expanding diagonal downward. The three zigzags had the right lengths and the right overlaps. You can review the count for the diagonal in the comments for the prior post. The diagonal and subsequent waves were long enough to make a lower low than yesterday's low as can be seen in the ES daily chart below.

ES Futures - Daily - ORDU

Prices, then headed higher in what is likely a Flat wave to the 62% retrace of the downward wave. Then, they fell off slightly late in the session, again, still closing higher than yesterday's close. So, we have a higher high, a lower low, and higher close: an outside reversal day up. The close is still in the lower third of the candle, however, and thus, the candle may still be classified as a doji, perhaps a spinning top type. As with all candle patterns, a significant close confirming the pattern is needed - in this case, lower.

If the low of an outside day up is exceeded lower within the next two trading sessions, the candle may be classified as a trap for the bulls. That remains to be seen. We will still want to see the lower trend line of the up trending parallel be taken out lower for better confirmation (parallel shown in prior posts).

Have an excellent start to the evening.

TraderJoe