When the market indexes closed below the T-line on Friday, there was a very good probability there will be some more selling consolidation going into the early part of this week. The Dow sold off early but note that it used the 50 day moving average as a support, at the low of the day. The NASDAQ opened lower but immediately started trading higher and closed up almost 100 points for the day. This created a bullish engulfing signal at the T line area. The positive trading in the indexes today made the prognosis of a trend channel remaining in progress. With the NASDAQ closing above the T-line, any positive trading tomorrow would improve the probabilities of the slow uptrend channel continuing. This has made for some very strong J-hook pattern setups.
Add the fact that the big traders, AAPL, NFLX, NVDA, AMZN all traded positive today was another good indication that the bearish sentiment had not taken control. Numerous J-hook patterns developed today in individual stocks, creating high probability bullish trade setups. Numerous J-hook patterns showed that the T-line was continuing to act as support, making the probabilities of the next wave to the upside that much greater. The reason for utilizing candlestick patterns is twofold. First, it produces a high probability direction for the next move, and secondly the magnitude of that move is usually very strong. These are the elements that make utilizing candlestick analysis a much higher probability of not only being in a correct trade, but a strong price move correct trade.
Chat session tonight at 8 PM ET.
Good investing,
The Candlestick Forum team.
