July 27th Market Direction

The major indexes closed below the T-line on Friday. The NASDAQ had a strong sell signal, a bearish Doji sandwich, but the trading of Friday, although lower, was trading above where it opened. This gives the candlestick investor a much quicker insight as to whether the selling was very strong or not. Today’s positive trading brought both the Dow and the NASDAQ back up to the T line. The S&P 500 and the transportation index both closed above the T line. This would imply the lack of any major selling pressure in the markets. However, the Dow and the S&P 500 still need to close back up above the T line to confirm that bearish sentiment is not in control. It will be important to see how the markets trading tomorrow. A lower open, followed by lower trading, failing to get the Dow and NASDAQ up above the T line will continue to imply profit-taking/downtrend of this market.

Fortunately, candlestick patterns reveal which sectors are remaining strong. The housing market is showing strength with numerous housing stocks producing Fry Pan bottom breakouts. Kicker signals are producing good strong trades. The strength of some sectors and the strength of specific signals also reveal a lack of overall very sentiment participating in the current markets. The Best Friend signal, producing a good uptrend in our recommendation of DKS, produced a Best Friend breakout going into wave three. The strength of candlestick signals and patterns allow an investor to identify which sectors and stocks are producing the highest potential profit trades.

Chat session tonight at 8 PM ET.

Good investing,

The Candlestick Forum team.