The Stock Market - What Are My Choices?
The financial markets provide the best location for purchase or sale of financial “instruments”. These markets also guarantee liquidity, establish asset prices, and reduce the expenses occurred while operating in the financial markets. For the beginner investing in these financial instruments, it’s always good to bring the markets down to their basics. The markets can be realistically divided into two separate entities; the market of promissory notes and the stock market.
For the sake of this investment newsletter, we will focus on the stock market. As mentioned before, funds are typically invested into a company, and the investor becomes a part-owner. The amount of influence, if any, which the investor possesses in making decisions within the company, depends on the percentage of shares that are possessed. Depending on the company and its size and standing relative to the rest of the market, investment options are divided into several basic categories: blue chip stocks, growth stocks, income stocks, and defensive stocks,
Blue Chip Stocks are shares of large companies having a stock price history of profit growth, annual return in excess of $4 billion, significant capitalization efforts and a stable record of paying off dividends. Such indicators are perfect “how-to invest in stocks” lessons for beginners. Such giants of the stock market are McDonald’s, Intel, and Nokia, to name a few.
Growth Stocks are shares of a company that tend to grow faster; the management team typically pursues the policy of reinvestment of revenue into further R&D and capitalization of the company’s assets. These companies rarely pay dividends and, if they do, the dividends are minimal as compared with other companies in the stock market community.
Income Stocks belong to companies with high and stable earnings that pay handsome dividends to the shareholders. Shares of such companies are a staple of mutual funds and a cornerstone for retirement plans of middle-aged and elderly people. Companies on the stock market with income stocks are Citigroup, BP Oil, and Progress Energy.
Defensive Stocks tend to remain stable under difficult economic conditions. They include companies in the food, tobacco, oil, and utilities industries. Commodities trading in these financial instruments frequently does well in difficult times because the commodities that they provide tend to be in demand in spite of economic downturns or stock market crashes. Defensive stocks are not leaders of the stock market during economic expansion because they do not experience the dramatic upswing in demand of other companies.
When investing in the stock market, it is important to examine companies carefully for income statements, balance, cash flow, and other factors. Once secure with a company’s stability, it is less likely that investing mistakes will be made, knowing that each company in a portfolio contributes to, or reduces, the bottom line. After determining the strength of a company, portfolio diversification becomes much easier. Analyzing stock market indexes and selecting stocks that fall into the different categories of stocks is a key to a balanced portfolio. Factors such as financial stability, individual ambitions, and long-term goals are a key in making the stock market a valuable source of wealth.
Market Direction: What do the markets 'not' appreciate? Uncertainty! Whenever world events create situations that make for uncertain economic conditions, investors will usually head for the sidelines. A Korean nuclear test definitely creates the environment. Both the Dow and the NASDAQ are in overbought conditions. Market pullbacks or profit-taking can usually be attributed to any excuse when the markets are in overbought conditions. A nuclear test by a renegade country would have been the optimal reason for lightening up on long positions. That could have been easily seen in today's trading. But the Bulls continue to make themselves present in this market.
The Dow has now formed three indecisive trading days. The small trading day, followed by a Hanging Man signal, followed by a Doji, would illustrate indecision in the overbought area. This would create some concern had the NASDAQ also show some weakness. However, the NASDAQ demonstrated constant bullishness on Monday. The nuclear test concerns did not seem to faze investor sentiment in this uptrend.
DOW
What should the markets do from here? Consider what the candlestick signals are revealing? The upward trend line in the Dow, which had acted as resistance for the past two months, now appears to be acting as support. Last two days of trading seem to have bounced back up as soon as the Dow came back and tested that level. The NASDAQ appears to be trading just above its upper trend line. Although both indexes are in the overbought condition, there has not yet been a confirmed sell signal. Continue to hold long positions until a definite sell signal appears in the indexes or as each position start showing sell signals in overbought conditions.
Understanding what the candlestick signals reveal, and what should occur on confirmation, allows the candlestick investor to be prepared. Three indecisive trading days have appeared in the Dow. The last trading day formed a Doji. What conditions can occur from this point? The uptrend should continue provided the Dow continues to close above the upper trend line.
Profits should be taken upon a weak confirmation of the last Doji. What would be that confirmation? If the Dow closed below the upper trend line, which would also be a close below the low of Monday's Doji. Understanding what should happen after a candlestick signal makes trend analysis much easier when understanding what investor sentiment created each candlestick signal. Using that knowledge, the analysis of a trend can be better analyzed. Upon seeing a signal in the proper conditions, a trend change can be better anticipated by knowing what has happened to investor sentiment upon seeing the resulting candle following that signal. Evaluating the investor sentiment, that creates a candle formation, allows the candlestick investor to gain a huge advantage. They can better project the direction of a price trend based upon the results of a candle formation after the candlestick signal. Click here to learn more about the 12 major candlestick signals training CD.
Investor sentiment has remained consistent through centuries of investing. The Japanese Rice traders profitably utilized that information. They identified when a high profit pattern was occurring. This was not a random event. This was the results of consistently seeing the same chart patterns occur over and over, producing highly predictable results. The FLSH chart provides an excellent example of a doji followed by a gap up in price. What should be expected upon seeing that formation? The Japanese Rice traders made that a high probability signal that the uptrend would continue.
FLSH
A Doji followed by a gap-up in price has a high probability of producing an uptrend. A Doji, at a major moving average with stochastics in the oversold condition, followed by a gap-up in price improves the probabilities of an uptrend occurring that much more. Candlestick analysis is nothing more than putting high probability indicators in alignment. Do all trades make a profit when the candlestick indicators all line up? Not always, but an extremely high percentage of them do. Why? Because the Japanese Rice traders witnessed hundreds of years of chart formations that produced the statistical analysis needed to recognize high probability trades. Witnessing the signals today is not the result of computer back testing. They are not the results of fundamental import. They are the result of witnessing probable results from specific candlestick patterns that have worked time after time.
Private training session's - A private training session with Stephen Bigalow consist of two solid days of learning all the nuances that make candlestick signals work successfully. If you would like to completely alter your investment perceptions; being able to identify high probability profitable trades, establish successful stop loss procedures, and develop a money management trading program that eliminates the emotions from investing, a private training session will dramatically improve your investment abilities. Each session consists of three to five people. That number of people produces a very good mix of questions that benefit each of the investors. Whether you want to improve your understanding of candlestick analysis and/or you want to improve your general investment perceptions, a private training session is going to teach you how to trade and invest like the professionals. This is not a difficult process! The visual information conveyed in candlestick signals, along with the easy-to-understand training techniques that Mr. Bigalow provides, greatly improves your investment abilities for the rest of your life.
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