In sports, the general strategy is that teams should play defensively because a good defense wins games. It is commonly believed that a defensive approach opens up offensive opportunities. Transposed to the stock market, Benjamin Graham, the “Dean of the Stock Market” wrote a book nearly seventy years ago on defensive investing that is still must-read material for investors. Defensive investing helps traders through not only the good times but also on days like Black Monday.

Black Monday occurred on October 19, 1987. In just a couple of weeks, the stock markets plummeted 30% including a 508 point drop on Black Monday. To understand its severity, on September 17, 2001, the market only experienced a 7% drop for the first post-9/11 day of trading. Both events were bad, but they hold valuable lessons for successful traders today.

A drastic fall like either of these can make even the most grounded investor consider jumping hastily to sell assets. Defensive investing requires that an investor understand his or her stock portfolio and search it for vulnerability. After that, fundamental analysis is key because understanding the stability of the market and your stocks makes you less exposed to such extreme stock volatility. Understanding defensive investing helps an investor to be prepared for bad times in the market.

Is that all you can expect from defensive investing? Absolutely not! Remember that in sports, a good defensive can open up offensive opportunities. Get ready for some offense here! Traders that do not follow their stock trading plans open themselves up to emotional reactions from greed and fear. When investors dump a company’s stock, the stock prices fall because of the sell-off. This creates incredible opportunities for others to purchase stocks well below their actual market value. When the slide ends and the market stabilizes, these defensive investors are in for very handsome returns on their investments.

Defensive investing also fits very well with a stock trading system like Japanese Candlesticks. Since the emphasis in defensive investing relies on long term investing, you need stocks that are more conservative and follow very dependable trends. Technical analysis with Candlesticks allows you to see exactly where your stocks have been and gives you a very good idea of the track in the immediately future. Such a system allows investors to move very confidently in both good times and in bad times.

Because Japanese Candlesticks is a powerful stock charting tool, it can help an investor find a subtle trend that indicates which way a stock will move. Used as part of an overall stock trading plan, Candlesticks can provide the type of analysis needed to find conservative stock trends and help traders to invest defensively.

One thing is sure about the stock market; nothing is sure. Everyday there are twists and turns that can attempt to lead a trader away from his or her stock investing system. A defensive investment plan will keep your investment secure and allow you to go on the offensive at just the right time. If used correctly, this investment philosophy will help you to “win” in the stock market game.

Do you buy a stock that has moved up 100% in one day? This is the type of question that most investors wrestle with. How do you decide when to buy a stock after a big price move? That decision is made much easier when applying the information conveyed in candlestick signals. The candlestick investor has a format for when and at what price to buy a stock. ONXX is a clear example of a big price move. In one day, the price moved up almost 100%. Is this a stock to be bought at these levels?

What can be evaluated in today's price move? First, it produced a Kicker signal. That signal formed right at the 50 day moving average. The prices gapped from the 50 day moving average up through the 200 day moving average. These conditions provide a very powerful buy signal. What can be analyzed from today's signal? After gapping higher on the open, the buyers were still participating going into the end of the day. This immediately reveals that the strength seen in this price move had not diminished during the day. Having the ability to analyze what is happening with investor sentiment with candlestick signals, an investor has a much better strategy for when to enter a trade.

ONXX

How does a Kicker signal usually occur? After an announcement or an event that will alter the perception of future potential. ONXX announced very good results from their cancer treatment. Will that be an announcement that could alter the perceptions of this company? Definitely! The price action the following day can be easily evaluated utilizing candlestick signals. If profit taking occurs, the candlestick signals will help reveal when the profit taking is over. If the price opens stronger tomorrow, using the one minute, five-minute, and 15 minute chart combination will help determine when to enter a trade, especially in stock prices that are experiencing tremendous volatility.

The Kicker signal illustrates a dramatic change of investor sentiment. That dramatic change will not disappear immediately. Entering a trade after a big price move becomes much more comfortable when analyzing what signals are being created on a daily chart as well as intraday charts. Will advances in the cure for cancer stimulate a company's stock price? You bet! Could this stock price go back to the $55 area? Of course! Utilize what the candlestick signals are telling you to benefit from big price moves. Do you buy a stock that has moved up 100%? You can very easily if the analysis of candlestick signals show you low risk entry levels shorter-term charts. Significant initial price moves, when evaluated correctly, can be the prelude to a 300%, 500%, or thousand percent moves. Do not miss out on these potential gains just because there has already been a significant price move.

Candlestick signal training seminar material - Candlestick signals reveal reversals! More importantly, candlestick signals demonstrate what is occurring in investor sentiment. The signals produce a very fast visual analysis process. Speed is essential for exploiting profits from high profit potential moves. This information is what is better understood when attending a candlestick trading seminar. Learn how to analyze when to enter high volatility situations. An important element provided in a candlestick trading seminar is the recognition of signals and their results. This recognition allows an investor to participate with confidence in high profit situations that most other investors will shy away from. You can learn how to use the candlestick signals to your advantage in most all trading situations. Do not miss the opportunity to learn how to exploit profits when they are being revealed to you.

The Dow showed the obvious weakness at the top of this trend channel late last week. A series of Doji's showed indecisiveness as the Dow was approaching the top of the trend channel. A Hanging Man formed on Thursday and the selling seen on Friday confirmed the Hanging Man signal. This clearly demonstrated that the Bulls were running out of steam and the Bears were able to step in. However, this is the same scenario that has been voiced for the past six months.

DOW

Until the obvious up trending channel is breached, the trend is still the predominant factor. A breach of the Dow's uptrend would be a hard selling time frame that would bring the Dow back down towards the 50 day moving average. The selling witnessed in today's trading was expected. The selling was also illustrating the lack of conviction, as seen in the previous pullbacks during this uptrend.

Good investing,

The Candlestick Forum Team