This information can be extrapolated for the long-term investor, looking for a reversal of a downtrend and anticipating the next long-term uptrend. It allows swing trader's to take advantage of the oscillations of a trend. It also allows the aggressive trader or the day trader to get into positions immediately before a major price move has started. The long-term investor can still enter a trade in the very early stages of a trend reversal. The long-term investor may have a slightly more conservative entry strategy. If a candlestick reversal signal appears, entering upon confirmation the next day is a prudent strategy. For the aggressive day trader however, the bullish candle that verified the reversal may have been missed as an opportunity for a quick profit.

As illustrated in the CSUN chart, getting in during the early stages of trading after the second doji produced a big profit. How can an investor take advantage of a potential price move before any bullish verification has occurred? That becomes relatively easy when you understand each of the 12 major signals. Throughout the teaching of candlestick analysis, one assumption can be made. The signals work extremely well or we would not be utilizing them after 400 years. If that is the case, then anticipating when the next potential price move could occur becomes a valuable strategy for the day trader or short term swing trader.

CSUN

Will prices move off of support or resistance levels without the formation of a candlestick signal? Definitely! But the rationale has to be that if a candlestick reversal signal occurs at an important technical level, the probabilities that a reversal has occurred is that much greater. Note in the CSUN chart the parameters for a successful reversal were all aligned. A Doji formed right on the 50 day moving average with stochastics in the oversold condition. That alone would have set up the possibility of a reversal. The next day another doji formed. Now there are two dojis forming just off the 50 day moving average in the oversold condition. Also, stochastics are now starting to curl up. Knowing some of the simple rules about a Doji makes the anticipation of the next price move much easier to evaluate. As often professed in the Candlestick Forum chat room, a price will usually move in the direction of how it opens after a Doji.

Add that information to the market analysis, the possibility of a successful trade becomes that much stronger. When analyzing the Dow and the NASDAQ, after Friday's trading it became more apparent the Bulls have taken control. Additional confirmation is established when the pre-market futures indicate a bullish open on Monday. Logic dictates that if the market is still in a positive mode, a chart like CSUN has seen dojis appear in the oversold condition right at the 50 day moving average AND stochastics are starting to curl back up AND we know a trend will move in the direction of how they open after a Doji, a positive open in CSUN created the likelihood of a positive trade on Monday. What was the logical target? A move to the T-Line would produce a 6% or 7% profit. Not bad for a day trade. The price moving up 26% is the bonus for being in the correct trade at the correct time. Will all prices move in the correct direction after candlestick reversal signals? No! Will all prices produce huge profits after candlestick reversal signals? No! However, when all the indicators are in alignment after a candlestick reversal signal, the probabilities of being in a correct trade at the right time become dramatically improved. There will be days when a price move produces inordinate profits. Utilizing the candlestick signals increases an investor's probability of being in those positions. This is not rocket science! Learning how to utilize the 12 major signals creates an investment perception that puts investors in the right positions at the right times. Click here for the Candlestick Forum 12 major signals special.

What did the signals tell us about the general market direction? A Hammer/Harami at the 50 day moving average in the Dow became visual evidence that there was a change of investor sentiment at that level. Being able to visually recognize what had occurred at an important possible support level allowed candlestick investors to start buying immediately. Cents the reversal at the 50 day moving average, Dojis near the oversold area provided additional information. The bears were not able to close the market back below the 50 day moving average. A trend will move in the direction of how they open it and trade it after a doji. That was obvious on Friday. A bullish candle after a hammer signal and two dojis near the 50 day moving average revealed which direction the sentiment was now moving the market.

DOW

This all occurring at the same time the NASDAQ was in the process of forming a potential Jay-hook pattern. Knowing what each major signal represents makes analyzing the market trend very easy to evaluate.

NAS

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