Simple candlestick trading rules allow investors to dramatically improve the probabilities of being in the right direction at the right time. The T line rule, assumes that investor sentiment has gotten negative/bearish if a trend/price is trading below the T line, especially after a candlestick sell signal. This is been demonstrated when the indexes close below the T line last week. If you understand that a close below the T line is an indication that investor sentiment has turned bearish, it makes the probabilities that any negative news is likely to add to the downside with much more energy. There will be a small number of positions acting bullish in a down trending market, but why go against the probabilities. As soon as the major indexes show a sell signal and a close below the T line, the immediate trading strategy should be closing long positions that are not showing strength and adding short positions to the portfolio.
Numerous positions could be identified today in the selling of the market after sell signals. A bearish kicker signal in NLCH revealed the strong selling pressure in the cruise line stocks. A number of stocks such as KRA had shown indecisive trading, a series of Doji’s, in the overbought area and traded much lower today below the T line. These are chart set ups showing a dramatic change of investor sentiment allowing the candlestick investor to go after short positions that have high degree of probabilities of heading down further. This market is likely to trade indecisively going into the election. Investors do not like uncertainty! Candlestick investors can identify what investor sentiment is doing based upon the confidence or the lack of confidence of anticipated outcomes. Until an outcome can be verified, the slow drifting downtrend of the markets will remain in progress.
Chat session tonight at 8 PM ET.
Good investing,
The Candlestick Forum team.
