The lower close on Friday illustrated a very relevant point! The T line has very strong ramifications. Because candlestick analysis is the graphic depiction of human nature and the T line acts as a natural support and resistance level of human nature, when you combine candlestick signals and patterns with the T line analysis, you gain a very powerful trend indicator that dramatically puts the probabilities in your favor. When the Dow and the NASDAQ closed below the T line on Friday, the probabilities of lower trading improves dramatically. Utilizing the combination of candlestick signals and the T line makes analyzing a trend very easy. When a price/trend closes below the T line in an uptrend, to relevant visual aspects can be concluded. First, the T line has already demonstrated that a close below the T line greatly improves the probabilities of a trend moving lower and secondly, visually it can be seen that the bullish force has now dissipated. The visual analysis of the market in general provides the first elements of whether to be long or short as the overall bias of a portfolio.
The markets closing below the T line on Friday provided much more reason for scanning for short trades set ups. This is merely common sense. If the probabilities indicate the sellers are taking control, scanning for short positions becomes the stronger profit potential. Our recommendation on shorting W was based upon identifying the sell signals that had occurred at the 200 day moving average resistance level, spinning tops, a hanging man signal, a bearish engulfing signal, followed by a close below the T line and a gap down Doji below the 50 day moving average. Lower trading today would confirm the downtrend with the probability of a bearish Doji sandwich forming. Because human nature works the same way time after time, the candlestick investor gains a huge advantage of being able to identify sell signals that are probably going to perform based upon the additional evidence the overall market is starting to sell off.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
