January 23rd Market Wrap-Up

The markets indicated profit-taking was going to be in progress based upon the evening star signal that formed in the Dow last week. The candlestick investor has the advantage of being able to analyze whether sell signals represent a major change in the trend or merely short-term profit-taking. The early trading Today continued the selloff but the NASDAQ in the S&P 500 demonstrated the T-line was still acting as a support level for the uptrend. The Dow traded down over 200 points early in the day, well below the T-line. Although the Dow closed lower, candlestick investors could clearly see that the bulls were still in control the trend. The Dow closed above where it opened, showing buyers were still in the market. Also, it closed above the T-line along with the other indexes. There is an important statistical factor relating to the T-line. When a price/trend continues to close above the T-line, the probabilities are extremely strong the uptrend remains in progress. Candlestick signals and patterns are the graphic depiction of investor sentiment. The T-line has Fibonacci characteristics. It acts as a natural support and resistance level of human nature. When you combine the analysis of candlestick’s in relation to the T-line, you gain a very strong probability factor for analyzing trends.

Maintaining a position, even when well in the overbought condition, can be done with much more comfort knowing the uptrend continues as long as the price stays above the T-line. This is very will illustrated in the trend of AAPL. This keeps investors in a position when normal human nature wants to take profits because there are profits. The T-line is instrumental when advocating cutting losses short and letting profits run.

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Good Investing,

The Candlestick Forum Team