The first analysis before any trades are established is being able to accurately assess the overall market trend. This is where the combination of candlestick reversal signals in the use of the T line dramatically improve your evaluations. Note how the Dow produced a MorningStar signal and a close above the T line yesterday. However, although the NASDAQ and the S&P 500 formed MorningStar signals, they did not close above the T line. Today’s bearish gap down, below the previous day’s candles, was clear evidence the bears were still in control. And the T line was not going to be breached. The assumption remains that the downtrend is still in progress. This is where putting the probabilities in your favor is greatly enhanced. Scanning for short trades becomes a much higher trade probability. Utilizing the information in candlestick signals and patterns allows the candlestick investor to identify which of those bearish trade set ups will likely have the strongest bearish price moves, both in identifying the direction as well as identifying which trades may have the strongest downward price moves. Common sense aspects of candlestick analysis can be applied to charts when analyzing your existing trading strategies or using the candlestick charts as your primary trend indicators. Merry Christmas.
