The Dow formed a hammer signal on Friday in the oversold area, bouncing up off the 200 day moving average. This provided the prospects of a reversal in the market trend based upon a positive open today. Today’s positive trading produces evidence the 200 day moving average was going to act as a support level. Why is the market trading positive today? We do not need to know! Our evaluation should be merely analyzing what everybody else’s decision making process is producing. Numerous short positions are showing potential reversal signals, be ready to cover if the strength of the market continues going into the close. How will the elections affect the market? We do not need to know how to analyze that. We need to analyze what everybody else’s decisions are producing.
November 2nd Market Direction
The Dow traded positive Today, up 400 points, after a hammer/Doji signal that supported on the 200 day moving average last week. This provided evidence that the 200 day moving average was acting as a strong support level. The NASDAQ traded up modestly after opening much higher for the day. What does the positive trading in the Dow illustrate? A Biden win? A Trump win? Has candlestick investors, we do not have to know what that implies. We merely need to analyze the fact the bulls are in control today. Too many investors tried to analyze whether they should be buying or selling but candlestick analysis eliminates that process. The signals and patterns will demonstrate whether everybody else is buying or selling. That allows for much more accurate trading based upon simple scanning techniques illustrating which sectors are acting the best during a trend.
Numerous oil stocks showed good strength today, as well as banking stocks. This might imply a Trump win. Strength in the solar stocks would imply a Biden win. Although it is more prudent to sit in cash when there is not a clear market direction, there still are numerous individual stock charts that are showing good strength for Long’s and goods selling pressure for shorts. The major advantage of candlestick analysis is the graphics that illustrate clearly whether the bulls or the bears are in control of a specific price move. It would be advisable to stay relatively heavily in cash until after the election. Then funds can be committed to the sectors that are showing strength based upon the winner of the election.
Chat session tonight at 8 PM ET.
Good investing,
The Candlestick Forum team.