January 6th Market Direction

Iranian retaliation! Impeachment! Crude oil spike! Wouldn’t we think each one of these situations could devastate the market uptrend? The major advantage of utilizing the graphics of candlestick charts allows in investor to immediately analyze what everybody thinks the results of outside influences would do to the overall market trend. Friday the Dow was down 230 points, bearish? Candlestick analysis provided two analytical factors that revealed very sentiment may not be taking control. Buying could be detected when witnessing the candlestick formation was showing bullish sentiment, buying occurring after prices opened. Although the Dow closed lower, it was trading above where it opened, indicating the bulls had not left the market. Adding the additional factor that the indexes closed above the T line also provided the statistical probabilities that the bullish trend was still in progress. The same scenario can be applied to today’s trading. The indexes opened much lower but showed buying after the open, to the point where the indexes actually closed above the close of Friday. Once again, today’s close above the T line continues to produce the high probability expectation the uptrend is still in progress. The visual development of individual candlestick formations during an uptrend dramatically improves the prospects of not getting whipsawed out of positions.

The lower open in the indexes also produce the same results in numerous stock prices. Any time prices can be seen to have supported at the T line and then started moving higher creates much greater probabilities the bulls are still in control of the trend. When the big stocks such as AAPL, NFLX, AMZN, NVDA all reveal bullish candlestick formations, this is an additional factor to confirm bullish sentiment is still the overriding market direction. Although the overall market started out much lower today, pattern set ups such as the J Hook pattern provided very easy entry strategies. Our recommendation on NINE was based upon a J Hook pattern set up in an oil sector stock. NINE finished up 22% for the day. Do all pattern set ups produce huge gains? Definitely not, but a major attribute of candlestick analysis is that identifying the patterns that have been created by human nature for centuries allows investors to be in situations where the probabilities of being in a big price move is greatly in their favor.

We will conduct a “Members Only” chat session tonight at 8:00 pm EST.

Good Investing,

The Candlestick Forum Team