The potential consolidation was evidenced when the Dow formed a bearish engulfing signal in Tuesday’s trading. The NASDAQ formed a Doji that day, also providing better evidence of a reversal in the market trend on a lower open after the Doji. The appearance of candlestick signals allows investors to make a much more accurate assessment as to what the overall trend of a move will likely produce based upon the results of individual signals during the trend. When using that information in conjunction with the T line, taking profits can be instigated but now watching to see what the overall markets are doing at the T line level. This makes for a very simple if/then analysis. If the premarket futures indicate a lower market open tomorrow, the likelihood of the continued downtrend is very great. Positive trading tomorrow reveals the T line continuing to act as an uptrending support level.
The T line, acting as a natural support or resistance level of human nature, provides a much better trend analytical decision-making factor based upon the T line rule, an uptrend can be maintained after a bullish candlestick signal and a close above the T line. That trade can stay in progress until you see a candlestick sell signal and a close below the T line. It also allows for much greater profitability when applying the analysis of individual signal confirmation at the T line area.
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Good Investing,
The Candlestick Forum Team
