The nature of a price trend or the market trend is much more precisely analyzed using candlestick charting. Although the indexes are trading above the T line, implying were still in an uptrend, the nature of the market reveals the uptrend is very indecisive. This is illustrated on a daily basis by the indecisive individual candlestick formations. Today, after trading higher most of the day, the indexes close back at approximately where they opened, creating Doji type days. This illustrates indecision. This produces an alert for the positioning of the portfolio. There should be both long and short positions. The indecisive nature of the markets put the overall market trend in a tentative mode, meaning that any good news or bad news can swing the markets one way or the other with the lack of any decisive sentiment in the markets currently.
The J-hook pattern can be utilized for offsetting any dramatic change of the indexes to the bearish side. A price pattern is a buildup of investor sentiment. This creates a trading platform when taking advantage of the patterns that allows for extra time to get out of profitable trades if the market all of a sudden turns bearish. Currently the oil stocks and the retail stocks are producing good J-hook patterns. Keep in mind, patterns have multiple benefits. First, they provide a high degree of probability of the price direction. Secondly, the magnitude of that price move is usually much greater than merely up trending stocks in an uptrending market. And finally, if there is a major change of market direction, because patterns are created by the buildup of investor sentiment, it provides extra time to get out of a profitable trade. Simple logic, by the strong sectors. This opportunity is provided by simple scanning techniques for identifying the strongest candlestick signals and patterns.
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Good investing,
The Candlestick Forum team.
