Archives for September 2019

After trading positive most of the day, although the Dow finished positive, it closed at or below the T-line. This is a very significant factor. It can be easily visually observed that there is no direction in the overall market trend. The simple T-line rule is basically a probability indicator stating that a trend will remain in a direction if there isn’t a candlestick reversal signal and a close backup above or below the T-line. Currently, the Dow indicates the downtrend remains in progress without a close backup above the T-line. The market sideways mode is still in progress. The character of the market is illustrated by trend movement followed by a sustained sideways trading mode, then followed by a trend and again followed by a sideways trading mode. That is the condition of the markets today. This puts more importance on analyzing each individual stock and sectors. Easy candlestick sectors scans can demonstrate which sectors are acting the most bullish or bearish. This makes for logical scanning of individual stocks in those sectors, as illustrated in the recreational vehicle sector.

What continues to produce good steady profits is the recognition of the strong signals and patterns. Our recommendation on VC was based upon witnessing a belt hold signal that was further confirming a J-hook/frypan bottom trending move. Once you learn the 12 major signals and apply that information to reoccurring candlestick patterns, you put the probabilities dramatically in your favor. Identifying strong patterns produces a dual benefit. The patterns produce sustained profitability even if the overall market trend is sluggish. Additionally, the results of a candlestick pattern is usually much more excessive than merely a trending stock price.

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Good Investing,

The Candlestick Forum Team

The graphics of candlestick charts make it much easier to see the nature of a price trend. As illustrated in the Dow, not only is the trend moving sideways but the visual graphics make it much more clear to see the indecisive nature that is in the current sideways trend, a bullish candle one day, a bearish candle the next day, repeating. This provides valuable information to the candlestick investor. The whole point of candlestick analysis is to analyze the strength of the Bulls or the Bears. This dramatically improves the probabilities by knowing whether to have a portfolio oriented toward the bullish direction or the bearish direction. Candlestick charts also reveal when there is no advantage being conveyed from the charts. Over the past couple of months, the nature of the market trends have been at up trend followed by an indecisive sideways trading range. A downtrend followed by an indecisive trading range, and currently after the most recent uptrend, the markets are in an indecisive sideways trading range. Why is this analysis relevant? Because there will be stages of market trading that illustrates when to have funds oriented toward the bullish or bearish direction. There will also be times when the candlestick charts demonstrate when to not be fully exposed to market risk, sitting more in cash.

The last uptrend of the market showed a change of investor sentiment with Doji’s in the overbought condition followed by a gap down toward the T line. This was good evidence that the majority of the bullish sentiment disappeared. Logic dictated that long positions that were starting to show weakness could be closed and short positions added to the portfolio. A very simple T line rule has provided good profitability in downtrending price moves based upon candlestick sell signals and a close below the T-line. ROKU and SPB are good examples of taking advantage of strong sell signals when the overall market conditions indicate bullish sentiment is starting to diminish. The major advantage of candlestick charts is the revealing of when Bulls are starting to take control or Bears are starting to take control.

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Good Investing,

The Candlestick Forum Team

The lower close on Friday illustrated a very relevant point! The T line has very strong ramifications. Because candlestick analysis is the graphic depiction of human nature and the T line acts as a natural support and resistance level of human nature, when you combine candlestick signals and patterns with the T line analysis, you gain a very powerful trend indicator that dramatically puts the probabilities in your favor. When the Dow and the NASDAQ closed below the T line on Friday, the probabilities of lower trading improves dramatically. Utilizing the combination of candlestick signals and the T line makes analyzing a trend very easy. When a price/trend closes below the T line in an uptrend, to relevant visual aspects can be concluded. First, the T line has already demonstrated that a close below the T line greatly improves the probabilities of a trend moving lower and secondly, visually it can be seen that the bullish force has now dissipated. The visual analysis of the market in general provides the first elements of whether to be long or short as the overall bias of a portfolio.

The markets closing below the T line on Friday provided much more reason for scanning for short trades set ups. This is merely common sense. If the probabilities indicate the sellers are taking control, scanning for short positions becomes the stronger profit potential. Our recommendation on shorting W was based upon identifying the sell signals that had occurred at the 200 day moving average resistance level, spinning tops, a hanging man signal, a bearish engulfing signal, followed by a close below the T line and a gap down Doji below the 50 day moving average. Lower trading today would confirm the downtrend with the probability of a bearish Doji sandwich forming. Because human nature works the same way time after time, the candlestick investor gains a huge advantage of being able to identify sell signals that are probably going to perform based upon the additional evidence the overall market is starting to sell off.

We will conduct a “Members Only” chat session tonight at 8:00 pm EST.

Good Investing,

The Candlestick Forum Team