Archives for January 2020

Amazon up huge, Microsoft at all-time highs, investor sentiment should be very bullish! But the Dow and the S&P 500 had not yet closed above the T-line yesterday. Today’s selling, still the effect of the China virus, obviously keeps the indexes trading well below the T-line. The prognosis remains the same, any long positions still require the lack of any sell signals and continuing to trade above the T-line. There are numerous dumpling tops that are working effectively today, DXC, CROX, CREE. Have both long and short positions in the portfolio.

Today’s tentative trading is occurring with the indexes trading at the T-line area. Buying any long positions should be done so with the idea that if the indexes can’t get above the T-line, be prepared to come back out of long trades quickly. It will be important to see whether the indexes can eventually close above the T-line Today. The markets are currently in an indecisive stage, have stop losses in place.

Today’s positive trading after yesterday’s Doji at least reveals the knee-jerk reaction to the China virus may have already played out. The indexes have to maintain their strength going into the close to indicate at least a bounce back up to the T-line area. Actually the knee-jerk reactions during an uptrend provide an outlet for profit-taking, which takes exuberance out of the markets. This makes the uptrend more sustainable. Look for a bounce back up to the T-line but then it will be important to see if they can get up through the T-line to continue the uptrend.

The strong sell signals that formed in the indexes on Friday, but Dow forming a bearish left/right combo, created the probabilities of more selling today. Was the magnitude of Today’s selling anticipated? No, but the strong sell signals of Friday implied there was going to be more downside. When the market/stock prices move down dramatically from a knee-jerk reaction, the 10 minute chart becomes the best time frame to see if the markets are going to bounce or continue to show weakness. That allows for closing long positions that are not showing any strength or as an aggressive trader, being ready to buy if it looks like the market and stocks stabilize and start moving back up. Currently with the Dow down 460 points, it is to early to see which direction the markets will move from here.

Although the markets are still trading above the T-line, the graphics of the candlestick charts are starting to reveal more bearish candles, meaning opening higher but closing lower. Although the trend remains above the T-line, the evidence of bearish presence is starting to reveal itself. Today’s excuse for the markets selling off after a much stronger open is one case of virus in the Chicago area. This does not make for a change of market conditions, merely an added excuse for why investor sentiment is starting to get a little bit bearish at these levels. Continue to take profits on charts that are starting to show weakness.

The markets indicated profit-taking was going to be in progress based upon the evening star signal that formed in the Dow last week. The candlestick investor has the advantage of being able to analyze whether sell signals represent a major change in the trend or merely short-term profit-taking. The early trading Today continued the selloff but the NASDAQ in the S&P 500 demonstrated the T-line was still acting as a support level for the uptrend. The Dow traded down over 200 points early in the day, well below the T-line. Although the Dow closed lower, candlestick investors could clearly see that the bulls were still in control the trend. The Dow closed above where it opened, showing buyers were still in the market. Also, it closed above the T-line along with the other indexes. There is an important statistical factor relating to the T-line. When a price/trend continues to close above the T-line, the probabilities are extremely strong the uptrend remains in progress. Candlestick signals and patterns are the graphic depiction of investor sentiment. The T-line has Fibonacci characteristics. It acts as a natural support and resistance level of human nature. When you combine the analysis of candlestick’s in relation to the T-line, you gain a very strong probability factor for analyzing trends.

Maintaining a position, even when well in the overbought condition, can be done with much more comfort knowing the uptrend continues as long as the price stays above the T-line. This is very will illustrated in the trend of AAPL. This keeps investors in a position when normal human nature wants to take profits because there are profits. The T-line is instrumental when advocating cutting losses short and letting profits run.

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Good Investing,

The Candlestick Forum Team

The Dow down, the NASDAQ up, the uptrend remains in progress, the indexes continue to trade above the T-line. Maintain long positions, the candlestick patterns are providing strong bullish opportunities, i.e. UBER J-Hook pattern. Although impeachment hearings are going on, the investment community is looking at economic factors, such as housing starts, to make their decisions.