I believe that by filtering the noise using stochastics, RSI, volume, and DMI (and when all the planetary bodies reach proper alignment <g>), I will be able to predict market direction. The candlesticks are the culmination of these indicators. Thus, with careful attention to the filters, the current candlestick pattern can imply a lot about future developments. For instance, the oct 8th hammer was preceded by a bullish peircing line, a minima in the RSI, and a minima in the stochastics that had just turned from declining to inclining. The move was then validated by crossing on top of %D. The RSI actually continued to drop to its nadir (3 days later), until %K crossed on top of %D.
Our current situation has %K at a maxima heading back towards %D, with RSI at a high level. This implies a stall (implied in the doji pattern) until %K at least touches %D, with a concommitant drop in RSI (daily pattern). If these criteria are fulfilled, the weekly chart implies more upward momentum.
I understand your belief that candlesticks are a lagging indicator, but much can be inferred from the current pattern, when viewed in conjunction with other predictive indicators. Also, choosing ones timeframe for analysis is critical for making predictive conclusions. For example, since the doji pattern occurred on the daily chart, and it is a weak doji pattern, it does not negate the strength of the bullish weekly pattern (with rising ADX,+DI,RSI, and %K).
I hope I'm correct. As the saying goes, only time will tell (OTWT). |
