Candlestick analysis provides a very clear visual result at expected technical levels. The Dow formed a bullish Harami signal right at the 200 day moving average with stochastics in the oversold area. Confirmation of the support of the 200 day moving average was evident over yesterday in today’s trading. The ultimate confirmation was investor sentiment closing the indexes backup above the T line. Simply stated, candlestick bullish reversal signals formed in the oversold area at major support levels and then closed above the T-line. This all provides the visual evidence that there has been a major change of the downtrend. Knowing this, candlestick investors can be aggressively buying knowing what to expect after bullish reversal signals appearing in the oversold condition.
Having the ability to analyze what the overall market trend will be doing allows for the appropriate positioning of trades. Witnessing bullish signals forming in the indexes after a strong downtrend prepares an investor to start covering short positions, when bullish signals start appearing in individual stock positions, and start adding bullish positions back to the portfolio. This analysis helps diminish emotional trading. Because the results of candlestick signals produce high probability expectations, the candlestick investor can recognize when the probabilities are going against existing positions and when it is time to establish new positions in the opposite direction. This allows for identifying which candlestick reversal signals and patterns occurring in individual stock prices make for the highest profit trade set ups.
Chat session tonight at 8 PM ET. Click here to register.
Good Investing,
The Candlestick Forum Team
