Candlestick investors have a huge advantage for identifying when a reversal is about to occur. The Japanese rice traders profess very simple results of human nature, where do most people buy? They buy exuberantly at the top. Yesterday, it was recommended, in our afternoon comments, to take profits. This recommendation was the result of witnessing the markets gap up in the overbought condition. This illustrated exuberance. The NASDAQ gapped up and formed a Hanging Man/Doji signal. This produced the alert for a reversal in the market trend. A lower open, after a Hanging Man signal, induces taking profits immediately. Having this type of forewarning, based upon normal human nature, allows the candlestick investor to create much better profitability by getting out of positions knowing that the market trend has a high probability of reversing.
There are very strong benefits of utilizing candlestick patterns. Our recommendation of TUP was based upon a fry pan bottom breakout this past week. There are three major advantages to trading candlestick patterns. First, the probabilities of being in the right direction is extremely strong. Secondly, the magnitude of a pattern breakout move will be much greater than merely up trending stocks during an up trending market. Finally, because a pattern is a buildup of investor sentiment, prices will usually hold up much better even when the general market might move excessively in the opposite direction. This gives the investor more time to get out of a trade profitably. Individual candlestick signals, such as the kicker signal and the bearish left/right combo provided strong short trade expectations. The candlestick signals and patterns produce dramatically greater probabilities of being in strong profitable trades.
No Chat Session Tonight.
Good investing,
The Candlestick Forum team
