Stephen Bigalow

October 17th Market Wrap-Up

The continued uptrend of the markets are still a result of the bullish flutter kicker of last week. The strength of that signal allows the candlestick investor to anticipate that the top of the wedge formation is still the likely target. That allows for the expectation of additional upside for at least the next day or two. The candlestick investor also has the advantage of being able to recognize what is occurring in investor sentiment once a major resistance level is hit. Indecisive trading at that level, such as Doji's or shooting stars, indicate a much higher probability that it is time to take profits at those levels. A breakthrough of the resistance level with a good solid candle indicates the lack of any concern for that resistance level anymore, implying more upside. Because each candlestick signal and pattern produce expected results, a trend is much more easily analyzed knowing what the nature of each signal or pattern represents. Utilizing the information built into a pattern produces much higher probabilities of participating in a breakout price move at the appropriate time. As illustrated in our recommendation on WLH, the gap up through the resistance level confirmed the frypan bottom breakout. Being able to visually recognize today's trading was an indecisive/Doji type day produces an extremely high probability profitable trade entry based upon a positive open tomorrow. A positive open, utilizing the Doji rule, would produce a high probability of more upside. This would create a bullish Doji sandwich breakout. When analyzing where the breakout should occur and then seeing a strong candlestick signal that would confirm a bullish breakout, the candlestick investor will not only have high probabilities of a correct trade but the additional benefit of an extremely strong price move. Combining candlestick signals with candlestick patterns produces the opportunity to participate in huge price movements based upon the results of investor … [Read More...]