Stock Charting The Common Thread of Great Businesses
All great businesses have it, that special feature that sets them apart from the competition. Whether it is the ability to introduce new products fastest, that name or slogan that people can’t forget, or that company that grabs the market share by the throat and won’t let go, stock charting successful businesses will show successful traders that most excellent businesses have specific traits in common. Or to phrase it a different way, there are important stock charting factors that separate a good stock from an ordinary stock. Among these factors, several of the non-financial characteristics that you can consider when stock charting successful businesses are product lines, competitive advantages and market leadership. Without these traits, it is highly unlikely that a company will be able to sustain any kind of leadership position.
Product Lines
When stock charting successful businesses, it is important to look at their picture from a long term investing perspective. Will anyone want, or even remember, the company’s product tomorrow? If a company’s source of identity is based on something that is a fad or quickly passing technology, the company’s success will fade as fast as its product. 8-track tape players were top-of-the-line technology at one time, but you will probably only find a player in a museum these days. Great companies with success you can track using candlestick charting have products and services that people desire year after year because of their universal appeal or because the company keeps the products fresh by responding to changing consumer demands.
Competitive Advantage
Competitive advantages, often called the "deep moat", protect great companies from their competitors and allow them to chart a successful business course that translates to the stock market. Such advantages can be high costs of entry, such as in heavy manufacturing or brand recognition like McDonald’s, Coca Cola or Wal-Mart. These types of advantages make it difficult for competitors to grab market share, and at the same time easy to conduct stock charting on the success of these businesses. Dell Computer’s well-organized operations let it build personal computers cheaper than its competitors. Dell was able to grab and hold on to positive stock market results and significant market share. Southwest Airlines is another company that did the same things as its competitors, but did it cheaper and better, carving out a solid piece of the highly competitive airline business with a work ethic that successful businesses love to chart.
Market Leadership
Market leadership is undoubtedly a stock charting characteristic of a successful company. Stock market movers are in the position to largely dictate the agenda and direction for their entire industry. General Motors dictated the direction of the automotive industry for fifty years on the strength of their position as the number one car maker in the world. Unfortunately, the downside of this position is that everyone is trying to knock off number one and with one mistake or sluggish response; others can begin to chip away at this position and create struggling stocks. GM is the perfect example of this situation as well with Toyota poised to move into the number one position.
Conclusion
Stock charting of highly successful businesses is easy due to their common characteristics. Chartable success will usually follow any successful business because the factors appear in the stock market. A successful trader can use these signals of successful businesses in combination with his or her stock trading plan and stock trading system to identify potential purchases. Japanese Candlesticks is a powerful stock investing system that will help any investor conduct stock charting of successful businesses. With a centuries-old record of accomplishment, a trader can truly identify successful companies and include them in a profitable portfolio.
Market Direction:
The Dow spent the last week acting very indecisive, Spinning Tops, Dojis, and Hammers, at the 12,350 level. This is where it peaked before in mid-November. A resistance level was obviously being formed. What was needed to indicate what the investment sentiment was at that resistance level? A candle that would indicate what the decision was going to be at that level. As illustrated in today's trading, it became very evident that the investor sentiment was not concerned with the resistance level anymore. Had a big bearish candle appeared, after a week of indecisive trading, that would have revealed a much different story.
Where is the next potential target? The top side of the trend channel.
DOW
Candlestick signals become a tremendous asset for the fundamental investor. Returns can be dramatically increased in long-term holds when buying at the appropriate times. The purpose of fundamental analysis is to discover the companies that have a long term positive outlook. But as we have discovered, prices do not move up in a straight line or move down in a straight line. Annual returns can be greatly diminished when buying an up trending stock at the wrong time. This is not to say the price will not move higher over the long term, but buying at a candlestick peak may result of months of 'holding' before the uptrend can come back up to a break even level.
One of the Candlestick Forums long-term picks fits the description. Nuance Corporation has very strong fundamentals. Their leadership, as far as voice-recognition, is in the right stages of the computer industry development. Computers are the accumulation of vast amounts of knowledge. Voice-recognition is becoming an integral part of contributing and extracting information from the electronic format. Communication with computers is in a very expansive stage of the industry's development.
Will stocks with great potential go straight up? Hardly! Why? Because investors buy stocks with a multitude of investment reasons. That is what causes changes of investor sentiment. Market conditions, opinions of a sector, profit-taking, potential competition, are all reasons why prices will move in patterns. Usually candlestick signals can dramatically improve the timing for coming into and getting out of an uptrend in stock.
NUAN
The first of October revealed a Bullish Engulfing signal after a Doji at the bottom. A Jay-hook pattern was evident at the 200 day moving average. A gap-up Doji in late October was a good time to take some short-term profits or lightening up of some of the long position. For those that do not want to move in and out of a position, selling options against the position increases long-term hold returns.
Having the ability to recognize the criteria for taking profits and re-entering a position not only multiplies the returns but dramatically reduces the risk. The candlestick signals show a clear illustration of when the buyers are coming into a position and when they are coming back out of a position. Why own a stock where the high probability candlestick sell signals indicate it is time to be out of it? Although the long-term analysis is for a much higher price, the short-term sell signal might be new information being assimilated into the price of the stock that was not considered previously. If that is not the case, the signals will illustrate when 'profit taking' is over and the buyers were stepping back in. This was illustrated at the first of December with a Doji, followed by a gap up, above the 20 day moving average. Note at that point, the 20 day moving average acted as support until the Hammer signal was followed by another gap up in price. Gaps, following candlestick signals, reveal very powerful bits of information. Click here for the Candlestick Forum's 'Gaps and Candlestick Signals' training CD.
Many investment professionals profess that you cannot time the markets. The candlestick signals disprove that thinking. Prices move based upon investor sentiment. The analysis of the candlestick signals allows an investor to sell at the peaks and by at the bottoms with a high degree of accuracy.
Member chat room - It is often asked what services are provided in the Candlestick Forum Members' Area. One of the strongest assets is a member chat room. This room is open during the trading hours. Ricky Wayne, a very successful candlestick trader moderates the trading room. Not only do the members have the opportunity to ask questions and throw ideas back and forth, they get to see the trades and the trading logic that Ricky Wayne is implementing.
Wouldn't you like to know how to develop formulas and scans for finding the high profit trades each day? You don't have to! The members constantly share the scans that are working successfully for them. Other investors add their input that will improve those gains. The community effort in the chat room keeps people from having to reinvent the wheel. Each investor is learning from each other. This dramatically speeds up the process for learning how to use candlestick analysis successfully and start accruing profits. Come join us.
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Good Investing,
The Candlestick Forum Staff