Jeff wanted me to take a look back at SRX to see if there was an entry point in late June:
I enjoy reading your blog and wanted to ask you to look at SRX for the past couple weeks. Big fat doji on June 24, followed by another red candlestick.
I am just interested in hearing your analysis of whether or not you would have seen an entry point (if at all) on or after those days, and why.
The two candles that Jeff mentioned certainly were reversal signals. I don’t like to enter based off of candles with extremely long wicks so I would not have used the June 24th candle as an entry signal. Part of my reason for not liking those long wicks is that my stop would ‘have’ to be almost 10% away at the low of that doji. Also, I just don’t trust candles like that because they often mean something wacky happened that day.
I liked the hammer-like candle the next day much better. An important thing to note is that the stock was able to climb back above the 50-day moving average on both of those days. That average has been support since March so the fact that the 50 held may have been the best buy signal. (There was also a nice buy signal given buy the MMAs.) Still, had I been tracking this in real time I probably would have passed because of how the On Balance Volume had fallen off. It looks like the volume on that long doji did a number on OBV and that probably would have faked me out.
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