The Dow formed Doji’s in the overbought condition on Thursday and Friday of last week. This created the prospects that a lower open in Monday’s trading would indicate at least a profit-taking pullback to the T-line area. The attack on the Saudi Arabian oilfields provided the stimulus for selling on the open today. Was this evidence of a market reversal? Because candlestick analysis is based upon a visual assessment of investor sentiment, analyzing the overall market trend can be done in the matter of seconds when knowing what should occur after candlestick signals in conjunction with high probability trend indicators. The analysis of the trend using only the Dow would not provide a full assessment of investor sentiment. Although the NASDAQ closed lower today, it opened at the T line and began trading positive. This clearly illustrated that there weren’t selling forces occurring in the NASDAQ, buying was occurring after the open. The S&P 500 traded lower but traded at the same level as where it opened, creating an indecisive Doji day. This immediately reveals the selling was not being done with any great conviction. But there is one additional very compelling indication the markets were not going to be selling off with great aggressiveness. The number of bullish charts continuing to trade bullish! Candlestick signals and patterns are created by the graphic depiction of human nature. An accumulated watchlist of candlestick charts can be a good indicator when revealing that a large percentage of bullish patterns continue to trade bullish indicates there is not any across-the-board selling of the markets. The results of bullish candlestick charts not only indicate that the market is not selling off, they are also allowing for profitability of a portfolio based upon the results of those charts versus the market direction be in the predominant profit element.
When numerous positions continue to trade positive in a sluggish or bearish trending market day, it can be assumed that there isn’t a rampant selling occurring in all positions, the market in general may just be consolidating. Candlestick analysis provides two very powerful analytical aspects. First, it identifies when investor sentiment is indicating a high probability of a bullish or bearish move, such as our recommendation on NVAX, utilizing the candlestick signals at support areas such as the 50 day moving average that everybody else’s watching. Secondly, with crude oil prices jumping up dramatically, the candlestick charts reveal that oil stocks are gaining the most bullish sentiment. The strongest bullish signals can now be utilized to identify which of those stocks in that sector are going to perform the best. Today, numerous best friend signals at breakout levels provide a simple visual method to cultivate the best trades based upon influences of that sector. This is a process of a utilizing the information built into candlestick charts to put your investment funds in the most powerful investment positions.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
