Important Candlestick reversal patterns (their strength) need confirmation so let’s see what is going on today.

By BRUCE KAMICH Jan 24, 2020 | 12:58 PM EST

Stocks quotes in this article:


One Twitter follower asked yesterday about my thoughts on a Japanese candlestick chart of American Airlines Group (AAL) . AAL made a big outside day and higher close (Western bar chart) and a big Hammer-like Candlestick pattern yesterday. Important Candlestick reversal patterns (their strength) need confirmation so let’s see what is going on today.

In this daily Candlestick chart of AAL, below, we can see Thursday’s long lower shadow and close back above the 50-day moving average line. The rejection of prices below $27 tells us that there are buyers below $27 who are willing to defend that area. The declining 200-day moving average line still represents potential overhead resistance.

The daily On-Balance-Volume (OBV) moved above the October/November high for this indicator suggesting that buyers of AAL have been more aggressive.

The Moving Average Convergence Divergence (MACD) oscillator is just below the zero line and could soon generate an outright go long signal.

In this weekly Japanese candlestick chart of AAL, below, we can see the long lower shadow on the candle pattern for this week.

Prices are below the declining/bottoming 40-week moving average line and the weekly OBV line shows a recent turn to the upside.

The MACD oscillator is edging up towards the zero line.

In this daily Point and Figure chart of AAL, below, we can see that the software is reading the X’s and O’s as bearish and has generated a potential downside price target in the $24 area. A trade at $28.93 will be a new high trade for the move up and refresh the uptrend.

In this weekly Point and Figure chart of AAL, below, we can see a potential upside price target around $34.

Bottom line strategy: As a long-time friend of Steve (candlestick) Nison, CMT, I know that candles are mainly reversal patterns but they need to be found after a trend up or down and you need to see confirmation of the reversal. Some of those conditions are being met on AAL.

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