The graphics of candlestick’s make it much more clear to analyze whether a market is in a profit-taking/consolidation stage versus a full-scale reversal. After a strong bullish move last week, the Dow and the S&P 500 produced a gap up shooting star/Doji. This indicated the possibility of a reversal. Tuesday’s trading produced bearish confirmation. The Dow formed a bearish engulfing signal after the shooting star/Doji. But the graphics of candlestick analysis allow for a much more accurate assessment of whether this was merely profit-taking versus a full-scale reversal. Witnessing the type of trading that occurred as the Dow pulled back to the 50 day moving average made it much more evident that there was the lack of selling pressure. The 50 day moving average acted as a support level as the Dow traded in decisively at that level, a Doji day. Today’s positive trading was more evidence the 50 day moving average was going to act as a support level and produced the probability of a bullish J-hook pattern starting the next uptrend. Profit-taking was more evident in the indexes because the transportation index continue to trade higher. This illustrated there was not a mass selling consensus in the markets.
Knowing that the markets were not reversing after a good uptrend last week allows for participating in the high profit candlestick signals and patterns. The frypan bottom was still very evident in XON, illustrating a breakout of that pattern with a gap up. Simple scanning techniques allows the candlestick investor to pinpoint which sectors are probably going to act the best. As J-hook patterns are being produced in the market indexes, they can also be identified an individual stocks and sectors. Gold prices were showing bullish trading based upon bullish J-hook patterns, allowing for identifying which individual stocks in the gold sector were also producing strong J-hook patterns. Because candlestick signals and patterns are based upon reoccurring investor sentiment, they produce trade set ups that not only produce high probabilities of positive trades but also puts investors in trade set ups that produce inordinately strong profits.
