Being long or short during market trends is more of a natural evolution of portfolio management when utilizing candlestick analysis. When the markets are in an uptrend and in the overbought condition, the appearance of candlestick sell signals in the market indexes create the process of changing a portfolio from being predominantly long to being predominantly short. This is not an instant transaction. As the market indexes start to show weakness, individual stock charts will also start showing weakness but not necessarily all at the same time. This creates a natural process for candlestick investors to start taking profits in individual stock price moves that are now showing sell signals. This does not result in any given day a portfolio changes dramatically from long positions to short positions. As each individual stock chart start showing weakness or a sell signal, the natural process is to move money to a short position based upon the confirmation of the market in general. This usually occurs over a multiple day process as the indexes continue to show the direction of the markets.
Is this a bad market? Not if the portfolio was oriented now to the short side. With the markets in oversold conditions, adding new short positions would be a higher risk trade, even though there is no change of the market trend, but sitting in existing short positions is the comfortable strategy. The graphics of candlestick charts provide a powerful analytical tool. It produces the visual analysis of what is occurring in investor sentiment. This allows the candlestick investor to be positioned in the correct direction of the market trend with an extremely high probability.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
