Stock Market Trend - Analyzed with Candlestick Signals
The stock market trend analysis, of course, is an important element when developing a trading program. The Candlestick signals, utilized at important technical levels, become an extremely powerful analytical variable. Along with using simple visual indicators to confirm major Candlestick signals, such as stochastics, trendlines, and moving averages, the stock market trend should be the initial factor for allocating positions in a portfolio. Why try to fight the flow? If the stock market trend is up, as indicated by Candlestick signals, obviously a portfolio should be oriented to the long side. If the stock market trend is down, either short positions should be heavily established in the portfolio or, for those that cannot short in their account, sitting in cash should be the strategy. If the stock market trend is sideways, it allows the Candlestick investor to have a mixture of long positions and short positions. This trading strategy would be based upon the rationale that the Candlestick signals are the cumulative knowledge of all the investors buying or selling a trading entity. Buying the long positions that have excellent "buy" signals and shorting some positions that have excellent "sell" signals, with the stock market trend being in a sideways trading range, should work reasonably well. The candlestick charts make the analysis of trends are easy.
The influence of the stochastics and/or important technical indicators enhance the probabilities of being able to analyze the stock market trend correctly. Major moving averages have a great propensity to act as support and resistance levels. Learning how to use these moving averages, in conjunction with the Candlestick signals and the stochastics, create a very strong platform for buying and selling at the proper times. Learning how to utilize the moving averages when analyzing the stock market trend increases the potential returns in a portfolio by enhancing the visual aspects of where a reversal is about to occur.
For more information on how to use the moving averages effectively, please investigate our "Candlestick Trades at Major Moving Averages" CD on the site. This is a one-hour video on where the moving averages and the Candlestick signals produce extremely high probability reversal situations. Once you study this video, your eyes will be automatically trained to anticipate where a major reversal will occur.
Market Direction - The stock market trend was affected on Wednesday by the 50-day moving average. One of the basic rules for moving averages is that when a price first approaches a moving average, it will fail. It is usually the second or third time that it tests a moving average that it will go through.
Tuesday's trading in the Dow closed right at the 50-day moving average. Wednesday, prices backed off most of the day. However, by the end of the day the prices came back up to where the Dow closed within a few points of even. Stochastics are still in an uptrend. This would indicate that there may still be some consolidation here at the 50-day moving average.
The NASDAQ formed a Doji on Tuesday followed by a weak open and selling off on Wednesday. This also indicates that there could be some pullback in the NASDAQ stocks. Evaluating both indexes produce some insights when they are evaluated at the same time. The pullback in the NASDAQ while the Dow seems to be holding steady would indicate that there is no mass selling in this market, just some profit taking causing some consolidation.