DBD Strategy Daily - Falling knives
August has taken anther toll on European and Emerging Market equities and currencies. Many fundamental comments are coming through with mean-reversing suggestions. We cannot go along this line of recommendation, unless maybe for a few days. We have many monthly marubozu candlesticks on indices and currencies. Those open at the top and close at the low of the month. They represent heavy selling pressure and they are not known for indicating a potential bottom. On the contrary, they are continuation patterns. Of course, those are monthly charts, and consequences can take time. One should be aware that going against those candles is going against the trend without any indication of a possible reversal. It is also called catching a falling knife.
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