The trend/nature of the markets are much more easily analyzed when knowing the simple Doji rule and being able to analyze what the character of investor sentiment is revealing on a day to day basis. The current downtrend of the market is pretty well been confirmed due to the fact the market indexes have never been able to get back up above the T-line. There were prospects of a reversal with the NASDAQ and the S&P 500, being in the oversold condition, formed indecisive/Doji type days right off the 200 day moving average. This would have made for a logical bullish reversal based upon identifying bullish confirmation after the indecisive candlestick signals that just touched the 200 day moving average. However, Today’s positive trading did not illustrate a strong bullish reversal. Another day of indecisive trading. The lack of any bullish candle indicated there was not any major change of investor sentiment. It still has to be assumed that as long as the indexes continue to trade below the T-line, the downtrend remains in progress. A lower open tomorrow would create a bearish Doji sandwich in the Dow, indicating a bearish J-hook pattern was in progress. This would lead to wave three to the downside.
In this condition in the markets produces a stage where is just remaining short is the best strategy. Adding new short positions with the markets in the oversold condition produce a higher risk trade. Adding long positions without any major reversal signals doesn’t have a great profit potential based upon not seeing the markets in general stopping their downtrend. Any long positions has needed the lack of candlestick sell signals and closes below the T-line. This is where candlestick patterns, such as frypan bottoms and J-hook patterns produce a viable profit in bullish trades. But the big profit moves are going to be going with the flow, short positions in a downtrend. The simple scanning techniques of candlestick analysis allow investors to find the best bullish or bearish trades in any market conditions in less than 20 minutes each afternoon. Knowing which direction the general market is moving and being able to identify the individual stock chart patterns that are going to produce the best profits dramatically decreases an investors emotions and their trading.
Chat session tonight at 8 PM ET. Click here to register.
Good Investing,
The Candlestick Forum Team
