Why should you have safety stops in place? Simple, when the market indexes are not showing any decisive trend, strength in one direction or the other, a simple Washington tweet or statement can dramatically move investor sentiment. The stimulus package still producing indecision. As you have seen in the morning and afternoon comments over the past couple of weeks, the analysis was that the uptrend was in progress as long as the market indexes continue to close above the T line. However, it was pointing out that the nature of the market trend showed a lot of indecisive trading, even though it was in a slow uptrend. Knowing what the nature of investor sentiment is during a trend is important. It illustrates the lack of any decisive bullish or bearish force. This leads to the possibility of dramatic changes of investor sentiment upon bullish or bearish influences. These market conditions make having safety stops in place more important. Getting stopped out of positions allows for reanalysis of the overall market trend as well as evaluating whether reentering a position, that was stopped out, is the best place to be reestablishing trades.
Candlestick patterns provide a safety factor. Patterns are set up due to a buildup of investor sentiment. This diminishes the importance of the overall market trend pertaining to that pattern price move. Investor sentiment is more in control. The J-hook patterns continue to show better probabilities of price moves continuing in the expected directions.LAKE, DOYU, EXAS, AVYA and ENPH
are all reviewing good J-hook patterns. But the bearish close below the T line in the market indexes also provide better opportunities in short positions, OSTK, FB, APD , and NVAX can be shorted on further weakness tomorrow. The weeds stocks, TLRY and CGC, can be bought on positive trading. That sector is showing good strength. These market conditions warrant having both long and short positions in the portfolio.
Chat session tonight at 8 PM ET.
Good investing,
The Candlestick Forum team.
