The benefits of candlestick graphics allows investors to see immediately what the results are of a big price move on the open. Today, when the indexes opened much lower, it could be seen, especially in the NASDAQ, that the Bulls were stepping right into by. By the end of the day belt hold signals were demonstrated in the Dow and the NASDAQ. The final result was that all the indexes eventually close backup above the T-line. Today’s trading indicated the lack of any follow-through bearish sentiment after the open. The belt hold signals produce visual confirmation that the Bulls were still in control of the markets.
This makes the market trend analysis relatively easy. Positive trading tomorrow would confirm the belt hold signal as well as indicating the indexes were still not going to close below the T-line. If the markets opened lower tomorrow, it obviously reveals the lack of bullish control but today’s trading would indicate lower trading was merely a continuation of consolidation versus a full-scale reversal. This makes the premarket futures tomorrow a very important indicator of the direction of the overall market.
Once again, the benefit of trading candlestick signals and patterns dramatically reduces the prospects of having existing pattern positions producing big losses, if any loss, on a day when the market is trading lower. This can be witnessed in numerous chart patterns, such as the frypan bottom, continuing to produce profitable bullish trades even when the market was selling off or trading lower most of the day. This is based upon a simple observation of human emotions. A candlestick pattern is produced by a build up of investor sentiment, not affected by what is occurring in the overall market trend on a day to day basis.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
