Most technical analysis methods utilize indicators that anticipate where major reversals should occur in price movements. Candlestick analysis utilizes many other conventional technical analysis methods. The major advantage that candlestick signals produce is the ability to visually recognize what investor sentiment is doing at any point during a trend. Essentially, candlestick analysis incorporates being able to verify and confirm what prices are going to do exactly at the levels the other technical investors are anticipating that something should happen. This knowledge creates a huge advantage for the candlestick investor.
Whether trading stocks, options, commodities, or futures, having the ability to recognize and react to the very early stages of a reversal, with a high degree of confidence, produces two very profitable benefits. First, it allows for entry prices into a position well before the masses of investors, as a price is confirming their anticipated targets. Second, the closer a price can be executed to the perceived reversal point, the better a stop loss strategy can be put into place. The closer prices can be bought at the perceived reversal level, the smaller the price loss will be if the candlestick signals indicate a failure of the reversal.
Candlestick analysis also incorporates the knowledge that specific price patterns can occur during strong uptrends. It can be logically anticipated that most prices will move up during market uptrends. However, the point of technical analysis is not only identifying which way price trends move, but to evaluate which price movements will be the strongest. If the point of stock market investing is to maximize your profits with the least amount of risk, then utilizing some simple pattern analysis to identify a high probability, high profit price movement becomes very advantageous. Candlestick analysis uses price patterns that have resulted in high profit price moves in the past. These price patterns usually have very simple explanations as to what was the investor sentiment that created the pattern. Understanding the sentiment allows an investor to get into a trade at the most optimal point and then evaluate what the price-trends is supposed to be doing at important technical levels. This information is what permits investors to make large and consistent profits in the markets.
Price patterns - Candlestick analysis uses candlestick signals to identify reversals of prices. This information can also be incorporated into the maintenance of establish positions. If the investor can recognize the potential of a price pattern during specific market conditions, the ability to increase profits is greatly expanded. The Jay-hook pattern is a prime example. The elements that form a Jay-hook pattern make it easy to identify, and also easy to exploit the next potentially strong price move. Jay - hook patterns will occur more readily when the markets are slow and consistent, moving to the upside. What does a Jay-hook represent? The first element of a Jay-hook pattern is a very strong initial move to the upside. More than likely, this will occur when the markets in general are not showing any great selling indications. Like all price movements, a strong price move is going to form a logical sequence of events. First there will be some profit taking. How does an investor differentiate between profit taking versus a full-scale reversal? By having the ability to recognize if a Jay-hook pattern is in process. This ability comes from using the knowledge that candlestick signals convey. If an investor recognizes that the pullback is doing so with very indecisive trading, and that the trajectory of the pullback and the stochastics appear to be losing downward momentum, then a new high profit trading strategy can be implemented for the next move.
Candlestick signals produce an arsenal of visual investment knowledge for the investor. Learning the signals and then learning how to utilize those signals for evaluating price patterns produces trading strategies that have consistent and high profit potential of strong returns
Price Pattern Special - The Candlestick Forum is now providing training CDs on individual price patterns. Stephen Bigalow walks through each pattern step-by-step. His easy to understand training process provides insights for an investor to learn how to recognize a price pattern as it is forming. Additionally, having the ability to recognize a price pattern that has recently formed provides a better understanding of what a price should do at specific levels to confirm a large price move is in the making.
Take advantage of the knowledge that Mr. Bigalow conveys in these education packed training CDs. Once you have learned how to recognize a high profit pattern, investment decisions become extremely easy. The candlestick signals illustrate the optimal time to get into a trade as well as illustrating when the potential pattern is not performing correctly. High profit candlestick patterns produce big profits a large percentage of the time. The returns are much greater than most expected returns from the markets. Like all candlestick analysis having the ability to recognize when a strong price move will occur and when it will not occur optimizes an investors use of their funds.
Click here for more information on training videos
Market Direction – The extended uptrend in the Dow has been healthy. This past week there was selling but it did not show anything more than profit taking. This analysis becomes fairly simple when taking into consideration the trading activity in the Dow and the NASDAQ. On days that the Dow was selling off, the NASDAQ held up well. Conversely, when the NASDAQ was selling off, the candlestick signals indicated that the Dow was holding up well. This analysis provides some very simple implications. During a strong uptrend, if the sellers were starting to take control, they would be selling off both indexes at the same time. What was witnessed this past week was profit taking in some areas while money shifted to other areas. The analysis of this activity becomes that much easier to identify when understanding what the candlestick signals are revealing.
When the markets in general are creating the same patterns that is found in individual stocks, the potential for making some very good profits becomes very strong. There are numerous charts starting to show the possibility of some big percentage moves if this market continues in a positive direction going into the Christmas season.
The DOW
Note the potential J-hook in the Dow chart.
The Nasdaq
The Nasdaq has essentially the same chart pattern
The NASDAQ Stock Market Inc. chart clearly illustrates that after a few days of pullback the indecision was evident with the Spinning Top and Doji. This stock now has the potential of another strong upside move. This anticipation is due to the fact that it has already moved with great strength. That means the buyers have been in with very good force, the profit-taking is over, and the obvious buying force should continue. Understanding what a Jay-hook pattern consists of allows an investor to be prepared for the next leg of the move.
NDAQ
Utilizing pattern identification in conjunction with candlestick signals produces the potential for making much greater profits than most technical analysis. Utilize this information for your own benefit. The probabilities are greatly in your favor when using price patterns that work consistently.
Good investing
The Candlestick Forum staff
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