Westpac and CBA both finished with candlestick reversal patterns yesterday.
In the case of CBA, this coincides with a test of the 200 day moving average. At this stage, Westpac has the distinct look of a chart that could provied a “W” reversal set up using the Bollinger Band strategy that we often feature.
These are both examples of the strategic approach of using candlestick formations for early entry on other set ups. This is covered in more detail in our webinar on candlestick techniques which you can access via the link below
Both strategies have taken advantage of the candlestick search function available in the live version of our Tracker charting software.
These stocks have opened a little weaker this morning but have done nothing to prevent the possibility of a buy set up based on rejection of the 200 day moving average (CBA) or Bollinger reversal (WBC)
The CBA chart is an example of a Harami pattern. This follows a steep downtrend. Moving average traders would typically use the Harami to buy today rather than waiting for rejection of the 200 day moving average to be confirmed by move above Friday’s high.
The Westpac chart is an example of an Engulfing Pattern. The body of Friday’s red candle is inside the body of yesterday’s green candle. This suggests change of momentum with the sellers in charge after a large downtrend on Friday but the buyers in charge at the close yesterday.
It’s early days yet but a move higher from here would confirm a trend trough above the lower Bollinger Band following a trend trough under it. This is also a sign of flagging momentum and a buy set up under the Bollinger “w” reversal strategy.
Again, a typical candlestick strategy would be to enter today rather than waiting for a move or close above yesterday’s high