The Dow closed out 139 points Today. Does that mean the downtrend is still in progress? Candlestick analysis provides much more information based upon the type of candlestick signal produced on any given day. The Dow closed very close to the top of its trading range today, creating a hammer signal. The candlestick formation provides a much more clear analysis of what is occurring in investor sentiment. A hammer signal, forming near the oversold condition, prepares the candlestick investor for a possible reversal. If not a full-scale reversal, possibly a bounce back up to the T line. Add the analysis of the NASDAQ, which opened almost on the 50 day moving average but eventually closed up near the high end of the trading range provides a much different perspective as far as what was occurring between the Bulls and the Bears. The fact that the NASDAQ closed near the top end of its trading range, well above where it opened, better revealed that the Bulls were coming back into the market after the open. For the candlestick investor, the direction of the market will be much better anticipated based upon what type of trading occurs on the open on Friday after bullish indications occurred during today’s trading.
How does candlestick analysis dramatically remove emotional trading most investors are victims? How often does an investor look at their trades/portfolio and wonder why they are still holding positions that are in a downtrend? Candlestick analysis provides insights into when to sell and when to buy based upon common sense candlestick signals and patterns. Unsuccessful investors are usually holding positions in a downtrend with the hope that the bottom is near and their positions will start going positive again. The problem with this scenario is greatly diminished when being able to analyze and react to signals that tell when there has been a change of investor sentiment. Most investors do not react to what the market is telling them, they are still trading their positions based upon what they hope will happen. Candlestick signals are the results of hundreds of years of visual analysis. Trading against high probability reversal signals is not a winning investment strategy. Learn how to use the information built into candlestick signals, and you will always be trading in the high probability trend directions.
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Good Investing,
The Candlestick Forum Team
