Did candlestick charts indicate selling today? Yes! Was the magnitude of the selling anticipated? No, but candlestick charts revealed that taking profits was viable and adding short positions to the portfolio was viable. This puts the candlestick investor in the right direction at the right time!
The graphics of candlestick signals revealed a changing of investor sentiment. Did the signals reveal the magnitude of today’s selling potential? Definitely not, but it put candlestick investors in the position of benefiting from the strong selling, either by having taking profits over the past few days and adding some short positions to the portfolio. The Dow, S&P 500, and the Russell 2000 formed island reversals. These are very strong trend indicators. This would suggest there is more downside to the markets. Any long positions still existing in the portfolio should be producing compelling reasons to stay long. Otherwise, the probabilities based upon candlestick formations and patterns indicate having some short positions in place and maintaining a larger cash position until the market provides better indications the downtrend has stopped.
The strength of the selling today has produced numerous bearish kicker signals. These can be utilized based upon seeing the premarket futures indicating the markets are going to open lower again tomorrow. Due to the magnitude of the selling today, having cash available allows for watching if/when the market will bottom and being able to move aggressively if the markets reverse back to the upside. Utilize the 10 minute chart. This is a simple process. If the Dow moves all the way down to the 50 day moving average with the excess of selling tomorrow, watch to see what occurs on the 10 minute chart to demonstrate whether the 50 day moving average is a likely support level. If the market appears to be trading in a particular direction, the 10 minute chart on individual stock charts becomes a very valuable trading tool.
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Good investing,
The Candlestick Forum team.
