The market reversal was easily identified with the Doji sandwich set up. A positive open after Friday’s Doji made the trend analysis relatively simple. A positive open today with likely have the same magnitude candle is what occurred on Thursday prior to the Doji. This information allows the candlestick investor to immediately enter trades that were showing the same pattern set ups. Numerous Doji sandwiches occurred today creating excellent entry points for both day traders as well as swing traders. The Dow forming a Doji sandwich after it formed a bullish Harami last week right on the 200 day moving average provided very good evidence the bulls were back in control, or at least the bearish sentiment had disappeared.
Having the ability to recognize strong reversal signals allows for entering trades at the ultimate entry points. As illustrated in the home builders sector, numerous Doji sandwich signals also indicated strong J-hook pattern expectations. This allows for recognizing the next price move magnitude, wave one of a J-hook pattern will usually equal wave three. Recognizing today’s strength, forming bullish signals in the market indexes also produced the appropriate times for taking good profits on short positions that have been working for the past few weeks. Not only to candlestick signals tell you when it’s time to buy a position, they also accurately indicate when it is time to take profits.
Good investing,
The Candlestick Forum Team
December 6th Daily Market Comments
The T-line acts as a very powerful trend indicator. First, it reveals when a trend is changing, as seen in the past few weeks when the indexes exhibited candlestick sell signals and closes below the T-line. Next, it indicates when a downtrend is in progress, allowing for continuing to hold profitable short positions. Combining candlestick sell signals at technical levels such as the major moving averages greatly increases the correct analysis of what is occurring in investor sentiment.