The left/right combo, one of your strongest candlestick reversal signals formed in the NASDAQ, followed by a close below the T line is a strong indication there has been a change of investor sentiment. The T-line rule is very simple! The uptrend remains in progress until you see a candlestick sell signal and a close below the T line. Uptrending stocks such as NVDA, SAVA and FSLR are all good examples of when to take profits, witnessing sell signals and closing below the T-line. Utilizing the simple trading rules based upon human nature allows investors to maximize your profitability by knowing when candlestick signals indicate trends are starting and when trends are ending.

Simple scanning techniques identify the best bullish trades and the best of bearish trades. Another sign of when investor sentiment is starting to turn bearish is merely the simple numbers of better bearish trades being identified versus bullish trades. Over the past few weeks, even though the uptrend has been in progress in the market indexes, the nature of the market has been showing profit-taking/selling as it has reached the overbought condition. Simple logic built into candlestick analysis allows investors to anticipate with more accuracy when price movements are about to occur, either bullish or bearish.

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Although the indexes continue to trade higher, there is one natural indication to have safety stops in place. The simple scanning process to find the strong candlestick signals and patterns are revealing much better short positions versus long positions. Better in the sense that there is a greater number of good short patterns developing. The simple logic allows the candlestick investor to be ready to close out long positions on any signs of sell signals/weakness and continue a slow process of adding short positions to the portfolio.

The J-hook pattern indicated in the Dow implies there is still more upside. The NASDAQ has not been able to close below the T line. However, the indexes are now in the overbought condition. This does not necessarily mean there is going to be a trend change, but it makes being more diligent for potential sell signals. When you take advantage of the consistent patterns created by human nature, you allow yourself to be better prepared to take profits and reverse portfolio directions. This continues to put the probabilities in your favor of being in the right direction of the markets.

Chat session tonight at 8 PM ET.

Good investing,

The Candlestick Forum team

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Good investing,

The Candlestick Forum team