Today’s positive trading did not indicate a reversal. This was the warning put out during our morning comments. Why? First, there needed to be a candlestick reversal signal. This meant waiting until the end of the day to see what type of investor sentiment was occurring. Second, the T line rule! As long as the indexes were still trading below the T line, it has to be assumed the downtrend remains in progress. This caution, created by the lack of any reversal signals, keeps candlestick investors from entering bullish trades too soon. Numerous stock charts indicated the potential of reversal signals and trading above the T line early in the day. But the Japanese rice traders always profess that a candlestick signal is not created until the close. Many stocks traded up above the T line with buy signals early in the day but eventually close back below the T line indicating the lack of any reversals of their downtrends.
Putting the stars in alignment is simple with candlestick analysis. Visual analysis is very effective for analyzing the trend of the overall market. Analyzing the downtrend of a market makes it very logical to be scanning for the strongest candlestick sell signals in individual stock prices. Strong sell signals and patterns dramatically improve the probabilities of trading in the correct direction. This allows investors to trade based upon probabilities, visually recognize with candlestick signals and patterns, versus the normal emotional trading of most investors. Join us each day in our chat room. You will be exposed to many experienced traders that can dramatically improve your candlestick trading ability.
Chat session tonight at 8 PM ET. Click here to register.
Good Investing,
Stephen Bigalow
