December 5th Market Wrap-Up

The indecisive trend of the markets is more clearly revealed because of the trading formations on a daily basis. Adding the factor of the market indexes trading indecisively below the T line provides a better probability trading strategy for investors. Without a definite direction of the market, the portfolio strategy becomes more oriented toward having both long and short positions in the portfolio. This strategy can be maintained until there is a definite trend indication, such as a bullish candlestick signal and a close backup above the T line, showing the bullish uptrend is back in progress. Fortunately, with simple candlestick scanning techniques, it is very easy to identify strong bullish signals and patterns as well as strong bearish signals and patterns. Logic dictates that no matter which direction the market is moving or not moving, candlestick scanning techniques will always find more bullish and bearish trade set ups than most investors will be able to handle. This produces the opportunity for not only finding good trades, but being able to cultivate the best of those good trades.

Very simple trend analysis techniques allows investors to participate in price movements based upon candlestick signals confirming an existing trend. For example, shorting BYND is based upon recognizing the downtrend of this stock price has been in progress for months. Additionally, witnessing candlestick sell signals at obvious resistance levels reveals investor sentiment is still continuing the downtrend. The same is true for analyzing bullish trends. The T line becomes a very important factor for recognizing the signals/patterns that are going to continue an uptrending move.

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December 2nd Market Direction

Logical trend assessments can be made when witnessing continuity in all the indexes. Today, the Dow, S&P 500, and the NASDAQ all had the same candlestick indications. They each created sell and closed below the T-line. On days when one index is up and another may be down, the common sense analysis is that there has not been any change of investor sentiment, the trend will usually continue. However, on days when all the indexes are moving in the same direction and as seen in today’s trading, closing below the T line, it is much more evident that there has been a general change of investor sentiment across-the-board. The magnitude of the sell signals today also indicated there had been a change of investor sentiment. This does not necessarily indicate a major reversal of the market indexes but at least it shows there is a higher probability of a pullback/consolidation stage setting up in the markets. This analysis allows option traders to make a much more decisive decision-making process when evaluating individual stock positions that might not be showing excessive weakness, but it does indicate the time factor may be about to reduce the time premium in specific positions.

The T line remains a very strong trend indicator. Individual stock positions that may have shown weakness and close below the T line now have the improved prospects of pulling back. They become positions that may be closed. When the market shows weakness and individual stock positions continue to trade above the T line, this becomes a clear indication that those bullish positions are not being affected by the market.

 

 

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November 25th Market Direction

The anticipation of the markets continuing higher was illustrated by the indecisive candlestick formations supporting on the T-line. This simple visual analysis allows a candlestick investor to assess the strength of the selling during a pullback/downtrend. Today’s positive trading confirmed the T-line was going to continue to act as a support and illustrated J-hook patterns in the major indexes. The J-hook pattern implies more upside, adding additional evidence the uptrend remains in progress. Because the candlestick signals and patterns are the accumulative buying and selling decisions of investors, having the reason for why the markets are trading higher is not required when doing candlestick analysis. Identifying the reoccurring patterns and price movements is all a candlestick investor needs to interpret. The lack of trade agreements, impeachment hearings, Washington indictments, are not affecting investor decisions. The importance of candlestick analysis is merely evaluating that investors are currently buying.

Price trend analysis can be accurately enhanced by knowing what each individual candlestick signal is revealing during the development of a price pattern. Additionally, the appearance of individual candlestick signals at important support and resistance levels merely reveals to the candlestick investor what the major decisions were made at those levels. As illustrated in our recommendation on ZM, a trend kicker signal, a very strong bullish signal, occurred right at a frypan bottom breakout level which coincided with a 50 day moving average. Identifying a combination of candlestick analysis factors dramatically improves the probabilities of being in the correct direction as well as a strong price move. Analyzing a price move after a breakout situation is much more accurately evaluated based upon simple trend analysis incorporating the T line. Having the ability to analyze the overall market direction dramatically improves the probabilities of being in strong bullish candlestick patterns. The magnitude of the moves of a pattern breakout is much greater than merely holding uptrending stocks during an uptrend.

 

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November 21st Market Wrap-Up

The potential consolidation was evidenced when the Dow formed a bearish engulfing signal in Tuesday’s trading. The NASDAQ formed a Doji that day, also providing better evidence of a reversal in the market trend on a lower open after the Doji. The appearance of candlestick signals allows investors to make a much more accurate assessment as to what the overall trend of a move will likely produce based upon the results of individual signals during the trend. When using that information in conjunction with the T line, taking profits can be instigated but now watching to see what the overall markets are doing at the T line level. This makes for a very simple if/then analysis. If the premarket futures indicate a lower market open tomorrow, the likelihood of the continued downtrend is very great. Positive trading tomorrow reveals the T line continuing to act as an uptrending support level.

The T line, acting as a natural support or resistance level of human nature, provides a much better trend analytical decision-making factor based upon the T line rule, an uptrend can be maintained after a bullish candlestick signal and a close above the T line. That trade can stay in progress until you see a candlestick sell signal and a close below the T line. It also allows for much greater profitability when applying the analysis of individual signal confirmation at the T line area.

 

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November 18th Market Direction

The graphics of candlestick signals in conjunction with an extremely accurate trend indicator, the T-line, dramatically reduces emotional stress and decision-making. The logic is built into each individual candlestick formation allows the candlestick investor to much more accurately assess what the investor sentiment is doing during a trend and/or at the reversals of a trend. This could easily be seen when the Dow broke out of the wedge type trading range of the past few months. The breakout candles did not show any hesitancy going through the resistance levels, almost a bullish kicker signal through that level. This indicated there was going to be more upside after it broke out. The information built into each candlestick signal or formation allows for a much more accurate evaluation of what the strength of the next price move will be, whether analyzing the market indexes or an individual stock chart. Logic dictates that if the overall market trend can easily be evaluated, such as a clear indication more upside in the markets is expected based upon the candlestick charts, investing in the strong individual stock charts produces much more profitability by expecting the results of a candlestick pattern breakout to provide big profits without bullish sentiment being diminished by the overall market appearing to head lower. The current market trend has not demonstrated any sell signals nor traded back below the T-line. The assumption remains that the uptrend is still in progress.

The information built into each candlestick signal reveals exactly what is going on in investor sentiment at observable support and resistance levels. The bullish Harami illustrating the selling had stopped in NFLX right at the 50 day moving average support level. The bullish Harami provides an extremely high probability trades set up knowing what the signal illustrated. Having the ability to analyze what the investor sentiment is doing at levels that everybody else’s watching allows the candlestick investor to enter trades much earlier in a profitable trade than other trading strategies. After entry, price patterns and/or the use of the T-line greatly enhances the profitability of a trade.

 

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November 14th Market Wrap-Up

Identifying the uptrend in a continuation process is relatively easy utilizing candlestick signals. Price movements that create patterns that are identified by most investors are confirmed more quickly when evaluating the signals that show strength at pattern breakout levels. This was illustrated in a breakout in the Dow, S&P 500, and the NASDAQ when the next wave was confirmed with candlestick bullish signals. Because candlestick signals are the graphic depiction of human nature and the T-line is a natural support and resistance level of investor sentiment, utilizing the combination provides very high probability trend analysis. The current uptrend remains in progress as it is continuing to trade above the T line. The first analysis of profitable trading is identifying the overall trend of the market indexes. This becomes much more accurate when using the information built into candlestick signals and patterns.

All boats rise in a rising tide! However, identifying the candlestick signals and patterns that produce the highest profit trade results allows candlestick investors to make much greater profits knowing that the overall market trend is continuing in a slow uptrend. The best friend signal, the J-hook pattern, and the frypan bottom are just a few of the candlestick patterns that allow for much greater profitability than merely holding stocks that are moving up slowly in a slow uptrend.GH is showing good strength because of a best friend gap up. DXC provides very strong upside profitability based upon a best friend gap up confirming a frypan bottom breakout. Because candlestick patterns produce to results, a high probability of being in a profitable price move and the results of the price moves are much greater when the patterns produce breakouts, the profitability of an overall positioning of the portfolio is dramatically improved. The percentage of correct trades are dramatically improved based upon the high probability results of candlestick signals. Where most investors have decent portfolio returns during an uptrend, due to a majority of stocks moving positive while a few positions are trading negative, the candlestick investor has the benefit of greatly reducing the number of trades in the portfolio trading lower.

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November 11th Market Direction

When the market indexes broke out through a resistance level that everybody else could observe, the candlestick investor has the advantage of seeing the bullish signal that was indicating the resistance level was not going to continue to act as resistance. At that point, high probability trend indicators, such as the T-line, continue to confirm that the next wave to the upside was in progress. Although the indexes have had a few days of indecisive trading, profit-taking, the overall trend evaluation is simplified by knowing that as long as the indexes continue to trade above the T-line, the uptrend remains in progress. Having that information allows the candlestick investor to enter trades that have probabilities of creating high profit situations with the underlying factor being there is no major selling pressure in the markets.

The lack of any selling indications provide very profitable trade set ups. Uptrending stocks stimulated by belt hold signals, such as our position in GOSS, dramatically improves the probabilities of not only being in the right direction at the right time but in very strong price moves. Holding steady Eddie positions as illustrated in our recommendations on VSTO and CARB allows for participating in the high profit exuberance at the top of steady price trends. Human nature works the same way time after time. Learning what patterns are created by human nature/investor sentiment puts the candlestick investor in situations where the probabilities are not only extremely strong of being in the right direction at the right time but also establishing positions that will produce excessive profitability.

 

 

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November 7th Market Wrap-Up

The markets moving to new high territory was not unexpected. Why? Because simple expectations of candlestick signals and patterns provide a good format for anticipating the continuation of a trend. Over the past few weeks the Dow was forming a frypan bottom pattern. The breakout level of the pattern was corresponding with recent market highs. Knowing what to expect coming out of a frypan bottom made the expectation of more upside easy to evaluate. Once the frypan bottom breakout occurred, utilizing the T line as a trend indicator provided additional confirmation that the Bulls were remaining in control. Knowing what to expect from specific signals and patterns allows the candlestick investor to be much more prepared and ready to move aggressively at levels that other investors might have some hesitancy. Candlestick analysis is not based upon the anticipation of results from fundamental information. Candlestick analysis is merely the graphic depiction of what occurs in investor sentiment time after time based upon the interpretation of results from fundamental analysis. This is a much more accurate assessment of what prices will likely do.

Utilizing candlestick patterns in conjunction with the T line keeps investors in profitable trades, reducing the flaws of emotional investment decision-making. The recommendation of staying with VSTO was based upon the lack of any sell signals and a close below the T line. Witnessing pattern setups allows investors to enter stock or option trades at the appropriate time as illustrated by the J-hook pattern set up in Tesla. Strong candlestick buy signals, such as the best friend signal, produces a high probability trade results as well as much better than average profit results. This can be seen in buy signals that were developed in PAYS, implying a big upside potential. Investor sentiment is the most consistent indicator for evaluating price movements. You do not have to be a sophisticated technical analyst to quickly learn the results of candlestick signals and patterns.

 

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November 4th Market Direction

The market indexes all hit new all-time highs, expected based upon the candlestick patterns setting up going into the all-time high breakout levels. The Dow formed a frypan bottom pattern as it moved up toward the breakout levels. The NASDAQ and the S&P 500 performed J-hook patterns which illustrated the wave three of a J-hook pattern would take those indexes out into new high territory. Having the ability to analyze the nature of investor sentiment at specific levels dramatically improves the probabilities of staying in positions through important technical levels. The bullish patterns also developed in the longer-term charts, implying a major new bullish wave was beginning.

When investor sentiment can be analyzed as being consistently bullish, this allows the candlestick investor to take advantage of high profit pattern breakouts. It also provides the opportunities to make big profits in lower-priced stocks that require an overall bullish atmosphere in the general markets. When investor sentiment starts getting bullish across-the-board, news items on individual stock positions produce much bigger profitability when there is little fear of bearish sentiment turning the markets around. The major advantage candlestick charts provide for the candlestick investor is the ability to have a vast majority of portfolio positions moving in the same direction all at one time. Many investors complain that there overall returns are not always great in a bullish market because of some of the positions in the portfolio trading lower even as the market trades higher. Candlestick analysis dramatically reduces having unprofitable positions in the portfolio during specific trends. This is what creates much greater profitability for the candlestick investor.

 

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October 31st Market Wrap-Up

The Dow remains the most sensitive of the indexes, reacting with much more activity on bullish or bearish news. Today’s Chicago manufacturing numbers sent the markets lower with the Dow showing the most weakness. However, by the end of the day the NASDAQ and the S&P 500 closed toward the upper end of their trading range, utilizing the T-line as a support level. The uptrend remains in progress as long as the indexes continue to close above the T-line. The NASDAQ and the S&P 500 show more resiliency now that they have broken out through the upper resistance level of the sideways trend. The Dow and the transportation index are showing the most weakness based upon candlestick reversal signals. This could pull the NASDAQ and S&P 500 lower if the Dow shows more weakness from this level. The final criteria is still the T-line. The indexes need to remain above the T-line to confirm the bullish sentiment is still controlling the slow uptrend of this market.

The strength of individual chart patterns continue to produce good profitability, even when the overall market conditions do not show overall strength. Our recommendation on CVET was based upon a cradle pattern breakout. The 2+2 evaluation uses the expected results of a cradle pattern as well as a positive open confirming the cradle pattern by trading above the T line. The combination of candlestick patterns in conjunction with T-line expectations dramatically improves the probabilities of being in the correct trade at the correct time. This was also illustrated in Today’s positive trading in our recommendation of this past week in UCTT, forming a Doji/hammer signal supporting on the T-line followed by positive trading today clearly illustrates the bullish strength remains in this uptrend. Candlestick analysis is merely the identification of what investor sentiment does with a high degree of probability and utilizing confirming indicators that improve the probabilities.

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The Candlestick Forum Team

 

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