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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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.

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The Candlestick Forum Team

Today’s indecisive trading in the markets continues to demonstrate one important trend factor, the indexes are still trading above the T line. There is prospects of a J-hook pattern forming in each of the indexes. This would have very relevant ramifications for the next trend move. If wave three equates to wave one of a J-hook pattern, that means the market indexes will be moving to all-time highs. Currently there is no major change of investor sentiment as long as the indexes continue to trade above the T line without any candlestick reversal signals. This analysis allows investors to maintain positions on trading days that normally make most investors nervous. Because human nature works the same way time after time, utilizing the simple trend indicators in conjunction with candlestick signals and patterns keeps an investor from being whipsawed in and out of positions.

The J-hook pattern and the frypan bottom pattern have produced trade set ups that have high probabilities of not only moving in the correct direction but also with a strong price move. When a candlestick pattern is developing while using the T line as a support level, it adds that much more credibility to the pattern expectations. This could be seen in a number of stock positions in today’s trading. There are two major benefits of utilizing candlestick patterns. First, the probabilities of a trade moving in the expected direction is extremely high. This is based upon hundreds of years of witnessing what occurs in human nature. Secondly, the results of patterns usually create much stronger returns than merely uptrending stocks during an uptrending market. Having this information allows an investor to dramatically improve the profitability of their portfolio by not only being in the right place at the right time, but also being in very strong price moves at the right time.

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The Candlestick Forum Team

The Dow formed Doji’s in the overbought condition on Thursday and Friday of last week. This created the prospects that a lower open in Monday’s trading would indicate at least a profit-taking pullback to the T-line area. The attack on the Saudi Arabian oilfields provided the stimulus for selling on the open today. Was this evidence of a market reversal? Because candlestick analysis is based upon a visual assessment of investor sentiment, analyzing the overall market trend can be done in the matter of seconds when knowing what should occur after candlestick signals in conjunction with high probability trend indicators. The analysis of the trend using only the Dow would not provide a full assessment of investor sentiment. Although the NASDAQ closed lower today, it opened at the T line and began trading positive. This clearly illustrated that there weren’t selling forces occurring in the NASDAQ, buying was occurring after the open. The S&P 500 traded lower but traded at the same level as where it opened, creating an indecisive Doji day. This immediately reveals the selling was not being done with any great conviction. But there is one additional very compelling indication the markets were not going to be selling off with great aggressiveness. The number of bullish charts continuing to trade bullish! Candlestick signals and patterns are created by the graphic depiction of human nature. An accumulated watchlist of candlestick charts can be a good indicator when revealing that a large percentage of bullish patterns continue to trade bullish indicates there is not any across-the-board selling of the markets. The results of bullish candlestick charts not only indicate that the market is not selling off, they are also allowing for profitability of a portfolio based upon the results of those charts versus the market direction be in the predominant profit element.

When numerous positions continue to trade positive in a sluggish or bearish trending market day, it can be assumed that there isn’t a rampant selling occurring in all positions, the market in general may just be consolidating. Candlestick analysis provides two very powerful analytical aspects. First, it identifies when investor sentiment is indicating a high probability of a bullish or bearish move, such as our recommendation on NVAX, utilizing the candlestick signals at support areas such as the 50 day moving average that everybody else’s watching. Secondly, with crude oil prices jumping up dramatically, the candlestick charts reveal that oil stocks are gaining the most bullish sentiment. The strongest bullish signals can now be utilized to identify which of those stocks in that sector are going to perform the best. Today, numerous best friend signals at breakout levels provide a simple visual method to cultivate the best trades based upon influences of that sector. This is a process of a utilizing the information built into candlestick charts to put your investment funds in the most powerful investment positions.

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The Candlestick Forum Team

Today the market indexes produced Doji’s, showing some indecision as the markets approach the recent all-time highs. With the indexes in the overbought condition, the tweets about China trade talks make the investor sentiment that much more sensitive. Today’s Doji makes tomorrow’s analysis relatively simple. The market will likely move in the direction of how they open after today’s Doji, the simple Doji rule. The distance away from the T line is also an alert there may be a better possibility of at least a profit-taking pullback in the markets. Numerous stock charts have indicated potential reversal signals, implying it is time to be prepared to take profits. Being able to identify what the overall market sentiment is revealing allows the candlestick investor to be more prepared for watching for a change of market direction/closing long positions. If the premarket futures show a lower open in Friday’s trading, anticipate the potential pullback to the T line. A positive open would imply bullish sentiment testing the recent highs.

The visual aspects of candlestick charts make it much easier to identify when profit-taking/selling is about to occur in price trends when sell signals are occurring at obvious resistance levels. WB is an example of a sell signal occurring when the price moved up to the level where it filled a previous gap. Witnessing potential reversal signals, at levels that everybody else is watching, gives the candlestick investor much faster evidence that it is time to close out positions. Because candlestick signals provide an immense amount of investor sentiment information, an investor does not need to be a sophisticated technical analyst. They merely need to recognize the signals that are showing a change of investor sentiment that have been highly accurate reversal signals based upon the Japanese Rice traders identifying the strong reversal signals over the past few hundred years. You gain greater precision in identifying price movements knowing the reoccurring aspects of human nature that make candlestick signals very accurate.

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The Candlestick Forum Team

Candlestick analysis is not necessarily analyzing each individual signal for a reversal, it is being able to identify the overall investor sentiment of a trend. As demonstrated by the Dow over the past month of trading, there were dramatic swings up and down almost on a daily basis, reaction to whatever the current tweet was. However, simple candlestick trend analysis techniques revealed when there was a change of investor sentiment. A bullish engulfing signal using the 200 day moving average as support once again and a close above the T-line at least provided visual evidence of a possible change of investor sentiment. A gap up the following day indicated the T-line was not going to act as resistance. Early last week, the markets sold off hard again but had one obvious trend factor, the Dow did not close below the T-line. Additionally, a rounding bottom action was taking place, revealing that bullish investor sentiment may be taking control. The next day, with the Dow opening positive, was another indication the T-line was acting as support and further illustrating a rounding bottom. The coup d’état was a gap up out of the sideways trading range and up through the 50 day moving average, revealing a new dynamic in investor sentiment.

Although the bottoming action was hard to identify on an individual signal basis, the accumulation of indicators confirming the Bulls were taking control provided a prospective that allow the candlestick investor to start looking at individual stock charts that might be revealing the same bullish tendencies. This analysis allowed for establishing long positions well before other trading techniques could identify bullish sentiment starting to enter the markets. The visual aspects of candlestick analysis have a tremendous amount of information built into each graphic signal and pattern. It merely takes common sense analysis to start identifying what is occurring between the Bulls and the Bears, allowing for entering long positions well before the rest of the market traders start participating. Numerous long positions established over the past week of trading has made good profits because those positions were established well before everybody else started entering those trades. This is not do to any great stock picking talent, it is merely identifying what investor sentiment is doing.

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The Candlestick Forum Team

The markets were illustrating a build up of bullish investor sentiment over the past few trading days. Today’s bullish trading had a different dynamic. Investor sentiment could be seen building up based upon a frypan bottom pattern progressing as well as the trading continued to stay above the T-line. This created the prospects that investor sentiment is starting to turn bullish. The remaining confirmation was the trading out of the trading range that had developed over the past 30 days. The benefit created by this analysis was having bullish stock positions as well as option positions in place with the prospects that an uptrend might be in progress. As demonstrated, existing long positions benefited greatly to the profitability of the portfolio in today’s trading. All the major indexes gapped up through obvious resistance levels, confirming a frypan bottom pattern build up.

Recognizing the bullish sentiment allowed candlestick investors to have positions in place anticipating more bullish sentiment. That established positions that could take advantage of today’s strong bullish trading. The compelling factor was the evidence that a candlestick chart was producing to have positions already established. Although today’s bullish trading was headline results, today’s positive trading showed a new investment dynamic. Having the ability to recognize bullish signals creating a bullish pattern produces an investment environment for establishing long positions at the appropriate time. This was easily identified with bullish charts in MU, WDC, and NVDA that were establishing strong bullish indications. For the option investor, this allowed for establishing call positions as well as bullish spread positions at the exact appropriate time. This is a major feature of candlestick analysis, allowing for the appropriate analysis at the appropriate times. This weekends comprehensive option strategy training will teach investors how to use the appropriate option strategies with the appropriate candlestick signals and patterns.

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The Candlestick Forum Team

The Dow, after trading much lower, closed at the T-line with an indecisive trading day. The S&P 500 closed lower but as a Doji just above the T-line. The transportation index also closed right above the T-line. However, Today’s indecisive candlestick formations in the indexes provided a more obvious revelation. The indexes closed back in the indecisive trading range that has been developing over the past month. This candlestick chart graphic demonstrates there is still not any decisive trend in the overall market. Additionally, the sideways trend of the market has been created by whipsaw movements on any given day to the upside or the downside, based upon the most recent tweets and headlines. This obviously makes maintaining long or short positions very difficult. Fortunately, candlestick charts reveal which stocks/sectors are maintaining consistent bullish trends or bearish trends. The graphics of candlestick charts pinpoint which sectors/stocks can be maintained in a portfolio when the majority of stock positions are whipsawing up and down.

The most important trend criteria remains the combination of candlestick signals and patterns staying above or below the T-line. This combination provides extremely powerful trend indication. Although the number of bullish or bearish chart patterns are greatly reduced in these market conditions, the number of good bullish or bearish trades can be quickly identified based upon candlestick scanning techniques quickly finding more good trading set ups than most investors can utilize. 10,000 trading entities will always produce identifiable candlestick trades. The T-line becomes an important trend maintenance indicator once positions are established. The simple rule of the T-line equates to knowing that the uptrend in a price is maintained after a candlestick bullish signal as long as a sell signal and a close below the T-line does not occur. Simple rules created by Japanese Rice traders centuries ago are still relevant today when investing utilizing human nature as the ultimate trend indicator.

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Good Investing,

The Candlestick Forum Team

Yesterday the Dow formed a bullish engulfing signal that bounced off the 200 day moving average and closed above the T line. Today’s gap up further confirmed the potential of a strong bullish reversal. The other major indexes showed bullish trading also. However, there is one visual piece of evidence that still needs to be addressed. All the indexes are still trading in an observable sideways trend. The Dow provides the most bullish characteristics as it is nudging the top of that sideways trend that has been created in the markets over the past month. Why is this an important observation? Because prices/trends move based upon investor sentiment. The nature of the market for the past 30 days has been reactionary to positive or negative tweet’s or announcements, producing drastic whipsaw reactions. Until investor sentiment shows a change, meaning a breakout of the current trading channel, it can still be assumed that any news related event/tweet still produce a whipsaw all affect. The strong bullish candle signals created in the indexes indicated the lower edge of the trading range was acting as support. This makes the trading strategy very simple. A breakout to the upside after the strong bullish signals have appeared over the past two trading days would indicate a new dynamic in investor sentiment, producing a good bullish trend indication. A failure to breakout, especially revealing in the Dow chart, would indicate investor sentiment is still in an indecisive mode.

What is the best trading strategy for this market analysis? There are very strong bullish signals occurring in individual stocks. Adding to the bullish positioning of a portfolio is viable but with caution. Any signs of the market indexes moving back down into the trading range or continuing in the sideways trading range would indicate market conditions still warrant sitting on the sidelines. There are a number of very strong bullish charts that can be bought based upon further bullish confirmation in the overall market trend. NVDA, for example, created a very strong MorningStar signal off the 200 day moving average. The Doji followed by a gap up from that level, the best friend signal, and closing well above the 50 day moving average and the T line, makes the prospects of a J-hook pattern set up extremely likely. It is this type of strength in a bullish signal that permits a candlestick investor to start adding to long positions based upon the lack of any strong selling indications in the overall market. Simple logic indicates that candlestick signals that are showing strong bullish potential in conjunction with a general market index breakout allows for entering trades well before other technical trading methods start confirming a trend.

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The Candlestick Forum Team

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