WDC has made an interesting Doji Candlestick today, 07-OCT...
Today's WDC candle might be construed as a Morning Doji Star; pending confirmation tomorrow (a bullish white body candlestick).
see Nison, page 64: Japanese Candlestick Charting Techniques
This is an interesting candlestick for a variety of reasons. WDC and QNTM (highly correlated) have just plain tanked after WDC made an earnings warning announcement a few days ago. WDC announces their earnings (after market close) on 09-OCT Thursday; QNTM on 21-OCT.
WDC's action since 01-OCT is a dead cat bounce - note the declining volume. However, there have been two tests of support at 37. The Doji today, which is an almost perfect "T" shape, (an upside-down Gravestone Doji -?) opened lower than yesterday's candle's close (a bearish counterattack), which followed yet another Doji on 03-OCT.
I'm not sure if one can say today's WDC candle is a Morning Star (even if tomorrow's candle is a nice, bullish white body - because it is a second testing of that 37 horizontal support line, rather than a "recent new low". But I do interpret today's candlestick as a reversal indication from 37, if nothing more. For T/A freaks, the "stochastics" for WDC will turn bullish if WDC actually does follow-up today's candle with a bullish white body :-/
As QNTM and WDC are highly correlated, it might be useful to consider what QNTM did today, by comparison. Unlike WDC, QNTM did not break its essential weekly UpTrend line during the recent debacle. Rather, it bounced off of it (which happened to be its 50-day Moving average, too), at 35~35-1/2. When WDC made its Doji today, QNTM made a kind of (black-bodied) Hammer, re-testing its long term UpTrend, whereas WDC re-tested its horizontal support.
When QNTM and WDC re-tested UpTrend at 35-1/2 and support at 37 today, my response was to buy more QNTM CALLS @ 6-1/4, looking to sell them quickly at 7-1/2, +20% within three trading days.
-Steve |
