Learning Stock Investing - Candlestick Signals Make it Easy
How do most investors learn to invest? Usually by the seat-of-the-pants. The common advice by the so-called professional investment advisers is to buy good companies and hold them long-term. We are told that you cannot time the market. However, if that is so true, why do the names Warren Buffett and George Soros mean so much to us?
They have learned how to time the market. The Candlestick signals reveal what investors are thinking about the future of price trends right now. Buying the best company in the world with a stock price that has not moved will not make us money. Buying stocks that have signals revealing that the investors are buying is what creates profits. The Candlestick signals show us exactly that, especially the 12 major signals. Understanding where the major signals work effectively in price trends is not a difficult process.
Learning stock investing does not require an MBA from college or years of intensive study to discover which stocks have the greatest upside potential. In a few weeks of studying the major signals, an investor can develop investment perceptions that will constantly put the probabilities of pulling profits from the market greatly in their favor. The Candlestick signals provide an immense amount of information when analyzing price movements.
Learning what the Candlestick signals reveal will allow a Candlestick investor to understand the human factors that make price trends move and reverse. The Dow Jones average formed two Evening Star signals this past week. What should that indicate? An Evening Star signal reveals that the sellers are now stepping in. Having the knowledge of what those Evening Star signals represent permit the Candlestick investor to exploit profits from the markets. Candlestick charts make this analysis much easier.
Market Direction - The stochastics of both the NASDAQ and the Dow have been in the overbought area for a number of weeks. As you should have witnessed in our free morning comments each day, it has been advised to maintain the long positions that have been in strong chart patterns, while taking profits in the charts that were topping out. It also has been advised this past week to maintain your long positions but, due to the first Evening Star signal, adding some short positions to the portfolio would have been prudent as well.
This advice stemmed from the indication of the selling starting to come into the markets. The trend had remained consistent to the upside since late October, starting from a strong Morning Star signal.
An Evening Star signal is one of the major Candlestick sell signals. As we saw, an Evening Star signal formed Monday and Tuesday of this week. Wednesday, with a strong bullish candle, could have negated the sell signal. However, seeing a major Candlestick sell signal, in an overbought condition, becomes an alert that the sellers have now made their presence known. Although we saw a strong bullish move on Wednesday, the Evening Star signal provided suspicion that we might be seeing the last of the uptrend. Thursday formed a small “star” trading pattern, representing more indecision. Friday's hard sell-off, after the day of indecision, formed another Evening Star formation.
The second Evening Star signal clearly demonstrates more selling pressure. Having been alerted earlier in the week that the sellers may be coming into the market, the second Candlestick sell signal provided more evidence that it was time to take profits and that it may be time to look for short positions.