The graphics of candlestick charts make it much easier to see the nature of a price trend. As illustrated in the Dow, not only is the trend moving sideways but the visual graphics make it much more clear to see the indecisive nature that is in the current sideways trend, a bullish candle one day, a bearish candle the next day, repeating. This provides valuable information to the candlestick investor. The whole point of candlestick analysis is to analyze the strength of the Bulls or the Bears. This dramatically improves the probabilities by knowing whether to have a portfolio oriented toward the bullish direction or the bearish direction. Candlestick charts also reveal when there is no advantage being conveyed from the charts. Over the past couple of months, the nature of the market trends have been at up trend followed by an indecisive sideways trading range. A downtrend followed by an indecisive trading range, and currently after the most recent uptrend, the markets are in an indecisive sideways trading range. Why is this analysis relevant? Because there will be stages of market trading that illustrates when to have funds oriented toward the bullish or bearish direction. There will also be times when the candlestick charts demonstrate when to not be fully exposed to market risk, sitting more in cash.
The last uptrend of the market showed a change of investor sentiment with Doji’s in the overbought condition followed by a gap down toward the T line. This was good evidence that the majority of the bullish sentiment disappeared. Logic dictated that long positions that were starting to show weakness could be closed and short positions added to the portfolio. A very simple T line rule has provided good profitability in downtrending price moves based upon candlestick sell signals and a close below the T-line. ROKU and SPB are good examples of taking advantage of strong sell signals when the overall market conditions indicate bullish sentiment is starting to diminish. The major advantage of candlestick charts is the revealing of when Bulls are starting to take control or Bears are starting to take control.
Chat session tonight at 8 PM ET. Click here to register.
Good Investing,
The Candlestick Forum Team
