Candlestick analysis allows the 2+2 analysis that adds multiple high probability results in a trend evaluation. Currently, the NASDAQ and the S&P 500 are in uptrends, using the T line as a support level. The Dow sold off hard today but bounced back up after hitting the 34 EMA. Now the Doji rule can be put into effect, the trends will usually move in the direction of how prices open after a Doji. The simple rules allow investors to get a much more accurate assessment of the overall market trend, allowing the appropriate trades to be put in place based upon their individual chart patterns.
The fry pan bottom pattern illustrates the buildup of investor sentiment. The patterns provide three major benefits. First, it illustrates the direction of price movement with a high degree of accuracy. Second, the magnitude of the price move is going to be much greater than merely up trending charts. And finally, because candlestick patterns are a buildup of investor sentiment that can be easily recognized, a reversal in the overall market will not usually immediately affect a pattern that has been building up, allowing for more time to get out of a trade profitably. Candlestick signals allow investors to immediately evaluate what the investor sentiment is doing at technical levels that everybody else is watching.
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Good investing,
The Candlestick Forum team
