Candlestick charting explained is nothing more than analyzing what normal human nature will produce as candlestick signals and patterns. Candlestick charting explained incorporates a common-sense analysis of the reactions of human nature. Where do most people sell? They panic sell at the bottom. This is very easily identified using the candlestick charts and collaborating indicators. A gap down in the oversold area demonstrates where investor sentiment becomes exaggerated. That is where most investors can’t stand the pain of a downtrend and they want to sell out no matter what. The Japanese rice traders provided common-sense analysis. When witnessing panic selling at the bottom, start watching for candlestick reversal signals. That was illustrated in the Dow and the NASDAQ on Thursday. When witnessing a gap down in the oversold area, the candlestick investor should be alerted to be ready to cover short positions. This also allows for the aggressive trader to start buying at the most optimal times. A gap down in the oversold area and then witnessing the prices moving dramatically away from the T line produces extremely high probabilities of a reversal getting ready to occur. Knowing this allows for preparing to close out profitable short trades and getting into long positions that have great probabilities of producing bullish profits.
