Candlestick Signals and Moving Averages, An Excellent Stock Investing System
The moving averages come into play when analyzing what the candlestick signals are doing. The combination makes for a high probability stock investing system. The signals provide a format that indicates what the investor sentiment is at a particular point in a trend. When the important moving averages are applied to the trend, valuable support and resistant levels can be targeted.
The signals reveal when a trend is reversing. But most investors want a stock investing system that reveals where a trend might come to an end. This is established with technical methods that show good historic results such as Fibonacci levels, trend-lines, Etc.
Extensive studies on moving averages. Not in the manner that most moving averages are used, waiting for combinations of moving averages to cross, but identifying the important moving averages that act as support and resistance levels.
Two of the major moving averages that create excellent reversal areas are the 200 day and 50 day. Adding these two moving averages to the chart analysis produces consistent targets for watching for candlestick reversal signals. When the moving averages, the stochastics, and a candlestick reversal signal all appear at the same critical point, you have a stock investing system that puts the reversal probabilities immensely in your favor.
Market Direction – Note how the moving averages become an influence in the DOW trend. This past week witnessed some toppiness first at the 50 day MA, then the close on Friday, a Shooting Star/Harami, right on the 200 day MA. This being done as the stochastics, start showing weakness in the over bought area. This becomes a strong indicator for taking profits upon seeing more weakness on the open Tuesday morning.
The NAS confirmed the weakness on Friday. Notice how Thursday’s strong final up-move was followed by a gap down, near the lower end of the previous trading day. It showed no real buying from that level, closing near the lower end of the trading range Friday. This demonstrated a very weak signal when in combination with the weak signal in the DOW. This is a good place to be adding some shorts to the portfolio and closing out long positions that do not have good charts.
Being able to see when is the right time to buy, analysing the indexes and the individual stock charts, the format for buying and selling is much more effective. Note in the FLEX chart that the NAS and the FLEX chart showed good buy signals at the same time. Now we are witnessing sell signals that indicate that this is about time to take profits.
We recommended the FLEX position at the doji/harami at the bottom and have been and will take profits here at the sell signals.
The Candlestick Forum Flash Cards have been getting excellent comments on how they have made learning the Candlestick signals so easy. Now the “Major Signals” poster, showing the major signals in a clear, attractive graphics is also getting excellent comments. If you have not viewed the poster yet, you might consider have this hanging in your trading room area to constantly remind you of what the major signals look like every day. To get more information about our Flash Cards or our "Major Signals" Poster, please visit the "Products and Services" section on our site.