December 13, 2008

Gap Down – JHX

By Planet Wealth

Today JHX gapped down 2.27%. Often when this happens there is a fundamental announcement, but not without prior warning on the charts.

Yesterday JHX produced a “Dark Cloud Cover” (DCC) candle stick pattern. A DCC is a bearish reversal pattern that can be very powerful when used with other entry signals of a trading system. This pattern will occur after a bullish run. The first candle, of this two candlestick pattern, is a long green candle. The second candle is a long red candle. The second candle must have an opening above the previous day’s close. The close must penetrate into the previous day’s trading by 50% or more.

Looking at JHX this pattern was produced under a weekly resistance line and weekly down trend line. The stock has also been making major Lower Peaks (LP) for the last three months. This added to the strength and probability of the stock continuing it’s bearish trend.

(click on image to enlarge)