Technical Analysis For Stocks, A Candlestick Signals Forte
Technical analysis for stocks becomes dramatically improved when utilizing Candlestick signals, not just the signals alone, but understanding how the signals are formed. Technical analysis for analyzing stocks becomes much better understood when incorporating the information built into Candlestick signals.Utilizing the immense amount of information found in Candlestick signals along with trading patterns that produce a very high degree of accuracy produces a combination of technical analysis that dramatically increases the probabilities of making profits. The candlestick charts make identifying the signals visually simple.
One of the most profitable signals is the J Hook pattern. It appears more often in market conditions that do not demonstrate any great indications of major trend reversals. The longer the markets in general appear to be moving sideways or in a slow uptrend, the more likely J Hook patterns will produce strong profits. Having this knowledge makes technical analysis for stocks that much easier. Not only do Candlestick signals indicate a high probability of a reversal, but when found in a pattern, the probabilities for producing profits dramatically increase.
The J Hook Pattern
A J Hook pattern is a variation of a wave 1 -- 2 -- 3 pattern. It becomes an easy pattern to identify with the use of Candlestick signals. The problem most investors have is understanding when to sell after a price has made a strong move. The J Hook pattern demonstrates some easily identifiable attributes. First, it starts with a strong uptrend that usually produces “stronger than normal” returns in a very short period of time. This strong up-move is significant enough to create the normal wave pattern. A reversal is caused by profit-taking, followed by a declining trajectory of the pullback, then the continuation of the uptrend. The J Hook pattern is the description of the pullback that starts to round out at a bottom and starts moving back up, thus forming a ‘hook.'
This pattern provides the Candlestick investor with some very simple profitable applications. The first uptrend will usually show clear Candlestick ‘sell' signals when it comes to an end. The top may be formed with the stochastics in the overbought area or very close to the overbought area. Because of the strong initial uptrend, the first evidence of ‘sell' signals should be acknowledged. Even if it is suspected that the uptrend could be forming a J Hook pattern, why risk remaining in the trade? When a sell signal becomes evident, take your profits.
What criteria makes a Candlestick investor suspect a J Hook pattern will form? The analysis of the market trends in general should provide that information. For example, if a stock price had a strong run-up while the market indexes had a steady uptrend, and the market indexes do not appear to be ready for a significant pullback, then a strong stock move could warrant some profit taking before the next move up. The benefit of being able to identify Candlestick signals is being prepared for some Candlestick ‘buy' signals after a few days of pullback. These signals would also alter the trajectory of the stochastics that will be pulling back.
Witnessing Doji's, Hammers, Inverted Hammers, or Bullish Harami's after a few days of a pullback movement becomes an alert that the selling is starting to wane. If the stochastics are flattening out during that same timeframe, then a set-up for a J Hook pattern is taking place. Taking profits when the first sell signals occur in the initial uptrend eliminates the downside risk. Those Candlestick ‘sell' signals indicate that it is time to get out of the trade. Even though the strength of the initial move would warrant suspecting a J Hook pattern to form, there is no guarantee that the pullback could not retrace 20%, 40%, 60% or even greater of the initial move up.
This creates a trading strategy that allows an investor to utilize the common sense built into the Candlestick signals. When it is time to get out, get out! If, after four days, small Candlestick buy signals start forming, there is nothing wrong with buying back into the position. The second entry of this trade now has some targets that can be clearly defined. The first target should be a test of the recent high. Although it may not be a huge percentage return moving to that level, at least the probabilities indicate that it should be profitable.
The benefit of Candlestick signals, once again, can be applied if and when that recent high is tested. Witnessing another sell signal, as the price approaches the recent high trading level, would be a clear indication that the recent high was going to act as resistance. This would induce taking quick profits and getting back out of the trade. On the other hand, if strong signals are seen as the recent high is breached, that would be a clear indication the high was not going to act as a resistance level. A new leg of the trend may be in progress.
Note the J Hook pattern in Fig. 1, the Loews Corporation chart. Once the trend started up, the pattern formed when the price pulled back for a few days. However, the stochastics never reached the oversold area and they came down only part way before hooking back up. The signals indicated buying before it pulled back too much, showing the buyers were going to test the high of the previous week. The gap above the recent high indicated that the buyers were very anxious to see prices go to much higher prices. Recognizing this pattern and the elements that form it allows an investor to move decisively at the right points of a trend. Being prepared for the pattern and knowing what signals to look for creates opportunities to participate in a profitable trend while greatly reducing risk.
Fig. 1 - Loews Corp.
There are a good number of J Hook patterns setting up right now. Some of these have the benefit of the stochastics pulling back to the oversold area before heading back up. A J Hook pattern can occur when stochastics are still in the overbought condition or are have just pulled back into a midrange. Visualizing the set-up of a J Hook pattern with stochastics very close to the oversold condition makes the upside potential that much greater.
Notice in the ATRS chart, Fig. 2, that the stochastics only came back to the midrange. This J Hook pattern also had the benefit of being analyzed as it came back to the 50 day moving average. The upside potential of the new trend, wave three, could be another two or three more points to the upside.
Fig. 2 - ATRS
Using the Candlestick signals in conjunction with high probability patterns allows an investor to analyze and take advantage of high profit signals.
Market Direction - The uptrend, starting last week with a Bullish Harami in the Dow, came back up to the moving averages, the logical targets. Although the Dow appears to be in a trading range, good profits can be made by analyzing what signals are appearing right at important technical levels. Currently, the moving averages do not appear to be acting as major resistance. Look for the trend to continue back up to the 10,700 level.
The Dow
The NASDAQ, however, has continued to move up to apparently test the 50 day moving average. It will be important to see what it does at that level. The 50 day moving average is getting close to the downtrend line. Continue to hold long positions with some of your short positions still in place.
The NASDAQ
Private Training Sessions – The analysis of what one market can do to another is easily evaluated when using Candlestick signals. The process for projecting market direction becomes relatively easy when a Candlestick investor can utilize the signals to evaluate all the markets that might be affecting the stock market. The better one can analyze the market direction, the much greater the profit potential.
Steve Bigalow spends a good amount of time during his two-day private training sessions demonstrating how to use the Candlestick signals to accurately evaluate market trends. Adding this information to the identification of high profit signal patterns allows an investor to control the profitability of their portfolio for the rest of their investment career. Don't miss the opportunity to gain some valuable knowledge first hand. The Candlestick signals produce an immense amount of analytical information. Whether trading stocks, commodities, Forex, or tulip bulbs, Candlestick analysis will dramatically improve your profitability. This information is taught in a very easy-to-understand manner.
There is one seat available in the October 22nd and 23rd training class. If you're interested in spending two full days with Steve Bigalow, learning all the intricacies for trading Candlestick signals profitably, do not miss this opportunity. The information that you are receive from a two-day training session with six months of follow-up will pay for itself many thousands of times over. You'll get a full grasp of what makes prices move at reversal points. You'll have a full understanding of the investor sentiment that make prices move. This knowledge will greatly enhance your profitability for the rest of your life.
If you would like more information on the training sessions, please contact us immediately. We will provide you with all the information you require for attending the next class. To contact us by phone, please dial our toll free number: 1-866-251-4015. Contact us now, spaces are filling up fast.
Monday Night 'Members Only' Chat Session – The next Monday night chat for members will be on October 3rd. Members, we'll see you Monday night at 8:00 p.m. Eastern time.
Thursday Night Open Chat Session - Everyone is invited to attend our Thursday night chat sessions. Please tell all of your friends! The next Open Stock Chat will be scheduled for Thursday night, October 6th, at 8:00 p.m. Eastern time.
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Do not delay, gain the understanding of how prices move. This is information that you will be able to use for the rest of your life. The profits that this information provides can be made in your account month after month after month.
You should never be put in a position where you do not understand why trades are being made for your account. Whether those positions are being put on in your managed account, or a hedge fund, or your own personal trading, you should have a full understanding of whether those funds are being put in the right positions at the right time. The Candlestick signals applied with Candlestick analysis will become the education process for understanding how to maximize your potential returns in your own trading or being able to analyze whether a money manager has any concept of correctly timing the markets.