SQ: The Morning Doji StarHey all! Decided to post something a little more educational rather than the same old chart. This post will cover the morning doji star along with how I'm playing SQ for the coming 3 weeks.
The Morning Doji Star:
A morning star pattern is a 3 candle bullish reversal pattern that occurs at the end of a downtrend (market bottom)
It is made up of a long red candlestick, a small doji candlestick (can be either a small red or green candlestick) that gaps below the close of the previous candlestick
It is followed by a long white candlestick
The first red candlestick confirms that the decline remains in force and selling dominates. When the second candlestick gaps down, it provides further evidence of selling pressure. However, the decline ceases or slows significantly after the gap and a small candlestick forms. The small candlestick indicates indecision and a possible reversal of trend. If the small candlestick is a doji, the chances of a reversal increase. The third long green candlestick provides bullish confirmation of the reversal, especially on high volume.
My Rationale:
After observing the morning doji star on the daily chart I'm confident that SQ will retest 227 and potentially retest the ATH of 243--maybe set fresh highs as we approach earnings. Further confirmation can be found on the weekly chart as seen below:
On the weekly chart we can see yet another bullish reversal pattern, this time a hammer off the 25ema. This was all the confirmation I needed that allowed me to make a risky yet confident choice.
My Play:
I started a small position in February 19 240c with an average cost of $4.80, I plan to add 3 more times before next Wednesday. My trimming targets are:
trim 1: 225
trim 2: 227
trim 3: 235
trim 4: 243
If I see signs of weakness or selling below 215 I might take the loss, but I will need to make that decision once the time comes after February 3.
As always I hope y'all enjoyed! Don't forget to leave me a like and a comment :)
