What is the buying of last week in the market indexes a bounce or a full-scale reversal? The candlestick signal, the Harami, make that much more easy to assess. Friday’s trading created a bearish Harami and all the major indexes. What was more telling was the fact that those bearish Harami’s occurred right at obvious resistance levels, the T line and/or the 50 day moving average. That made the analysis of whether the markets had a bounce or a full-scale reversal much more identifiable. Today’s premarket futures/lower trading confirmed the bearish Harami signal. The failure to get up through the resistance levels following a candlestick reversal signal made it much more clear that the bounce came up to the resistance levels and continue to sell off from there. Knowing what the results of each candlestick signal illustrates allows the candlestick investor to be ready to move in and out of positions with much greater speed and accuracy.

The T-line is a very relevant trend indicator. As indicated in our short recommendation on TX, the lack of any buy signal and the continued trading below the T-line provided a very simple trading strategy, stay short until the appearance of a buy signal and a close backup above the T-line. Note how a bearish left/right combo signal, a Doji followed by a bearish engulfing signal, that formed in mid July started the downtrend. The strength of a left/right combo provides very high probabilities of a reversal in spite of the overall market direction. The recommendation of AERI was based upon a bullish left/right signal up through the T-line showing a dramatic change of investor sentiment/trend. Utilizing the information built into candlestick signals allows investors to see immediately what is occurring in investor sentiment and what signals/patterns will develop from that level.

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The Candlestick Forum Team

Where do you grab for the falling knife? The candlestick signals that appeared in the market indexes last week, bullish Harami’s telling us the selling had stopped and the hammer signals also showing reversals, were confirmed with bullish trading today. The indexes came back up to the first logical target, the T line, as well as 50 day moving averages. The appearance of the bullish signals followed by bullish confirmation provided high probability that a bottom has been reached and the knee-jerk reaction of the Chinese trade wars has diminished. Numerous individual stock charts were also showing bullish reversal signals on very observable support levels. It is this visual information that produces entry levels at high probability levels.

The bullish left/right combo was evident in the TSLA chart. Add the prospects that everybody was buying at the 50 day moving average support level dramatically improves the probabilities that this was a strong buy. Knowing when the markets are showing a change of investor sentiment makes the probabilities of pattern breakouts, such as the scoop pattern identified in our recommendation on PTLA, greatly improving the prospects of not only having a bullish trade but a very profitable bullish trade. A scoop pattern breakout usually produces a high profit move. Identifying the reversals in the major market indexes allows for scanning and executing high profit individual candlestick signals.

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Good Investing,

The Candlestick Forum Team