August 26th Market Direction

Candlestick charts allow investors to observe the obvious. There are strong bullish signals to indicate an uptrend. There are strong bearish signals indicate a downward trend. And candlestick formations illustrate the nature of investor sentiment! As illustrated in the market trends of the past four weeks, strong days to the downside, followed by strong days to the upside, and that trend repeating makes it very clear that it can be analyzed that neither the Bulls nor the Bears are in control of the market trend. There will be times when the market indexes demonstrate indecisive sideways trading. This would instigate having both long and short positions in the portfolio. There are also times when it can be visually recognized that the sideways mode of the market involves vast oscillations to the upside and the downside. These market conditions make maintaining long and short positions very difficult. These conditions warrant sitting out of the markets until investor sentiment can be much more easily identified.

With price movements of individual stocks being whipsawed with the market moves, there is only one indicator that becomes the crucial final decision making indicator, the T line. The ramifications of a price move remain the same even in a wild oscillating market. A very simple rule, you can stay long as long as the price does not reveal a sell signal and a close below the T line. This has been illustrated as a very high probability trend factor. The same scenario is true on the short side. You can stay short until you see a candlestick buy signal and a close above the T line. The probabilities of maintaining a position using the simple rule is predicated on a very simple factor. Candlestick signals illustrate a change of investor sentiment. A close above or below the T line confirms the change of investor sentiment. Maintaining bullish positions that has not closed below the T line even though the overall market is moving up or down in a strong fashion continues to demonstrate the strength of bullish investor sentiment continuing a trend. Once you have learned how to utilize the anticipated results produced by human nature, creating candlestick signals and patterns, you will dramatically improve your profitability.


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

Good Investing,

The Candlestick Forum Team