The first days of trading in a new year usually reflect the investor sentiment of the big-money. Sometimes you see specific sectors that come out strong in the first few days/weeks of a new year because that was the evaluation over the holidays that was going to be the sectors most beneficial in the current economic environment. This is usually indicated by strong chart patterns in those stocks of those sectors. This year, the candlestick charts indicated a different criteria. The T-line had been acting as an effective uptrend support level over the past four weeks. The last few days of training of 2019 showed some selling but without one major candlestick technical factor, the markets cannot close below the T-line. That allowed for the anticipation of what investor sentiment was going to indicate as far as buying/selling going into the new year. Obviously, a negative open would have indicated the selling was still in progress because of the trading below the T-line. As a candlestick investor, the logic is very simple. A positive open would indicate the T-line was still acting as a support level. The magnitude of the positive trading in the premarket futures indicated very quickly the bulls were still in control. This allowed for adding long positions immediately and continuing to hold long positions in the portfolio that were continuing to trade above the T-line. Putting these simple candlestick analytical factors together allows investors to know what to do with portfolio positioning with a high degree of accuracy.
The strength of the premarket futures created high probability entry strategies using candlestick patterns. FTCH had been recommended early in the week based upon a fry pan bottom breakout potential. Charts demonstrating fry pan bottom breakouts such as MAVR and AAPL provide huge investment advantages. The results are usually very predictable as far as direction, even though on any given day the overall market direction may be negative, a fry pan bottom pattern is the buildup of investor sentiment which does not consider the overall market trend has a relevant factor. Additionally, the result of the investor sentiment buildup produces extremely large profits when the pattern breaks out as investor sentiment becomes very confident. Exploiting the information built into candlestick patterns is merely identifying price movements that have resulted in high probability/high profit trade results for hundreds of years. Prices do not move based upon fundamentals, prices move based upon the perception of fundamentals. This is exactly how candlestick signals and patterns are created. Nobody knows what this coming year will produce as far as market results. However, utilizing the information built into candlestick charts allows an investor to much more accurately analyze the overall market trend and then extrapolating that into analyzing the price movement of each individual stock chart.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
