Where to most people buy? The Japanese rice traders profess that most investors buy exuberantly at the top. Fortunately, this can be illustrated using candlestick charts. It can be seen that during the steady uptrend, the indexes continuing to stay above the T-line, profit-taking is likely to occur when the indexes move a little bit too far from the T-line. Today’s bullish trading provided an alert. The indexes gapped up in traded higher today. The gap up of a price move in the overbought condition alerts investors of the possibility of exuberance starting to come into the trend. This does not necessarily mean a major reversal of the trend, merely the possibility of profit-taking that might move the trading back down to the bottom of the trend channel, a few days of profit-taking. After a very strong bullish week in the market, profit-taking can be anticipated before a three day weekend. Is this time to close out long positions? Candlestick analysis provides the benefit of witnessing reversal signals, producing the prospects of specific stock moves getting ready to reverse, or the lack of sell signals even during a market pullback implies specific stock trends are still in progress. The candlestick investor gains a huge advantage of knowing when a price move has reversed versus merely a pullback during an uptrend.
The J-Hook pattern has provided some very profitable trades set ups over the past few trading days. The J-Hook pattern produces a high probability entry into a stock price that has been moving up over the past few weeks or months. The probabilities are greatly enhanced when witnessing a J-Hook pattern, created by profit-taking, followed by new buying, that it becomes a good time to be entering an up trending stock price. The common sense built into candlestick analysis provides investors with much better entry strategies than merely buying up trending stocks during an uptrend. Maintaining up trending positions is much more comfortable when using the T-line as your trend indicator. This keeps investors from being whipsawed out of profitable positions.
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Good Investing,
The Candlestick Forum Team
