Every investor should have a stock trading plan, especially going into a new year of investing. The development of the next year's stock trading plan should include the evaluation of the previous year. Specific sectors moved very well during 2005. The energy stocks for example. Analyzing what sectors or industries could have strong moves in the coming year is like shooting in the dark. However, simple sectors scans utilizing candlestick signals reveal which sectors/industries appear to be bottoming out and starting an upward trend. Assuming that some sectors will perform well after other sectors have performed well provides a smaller universe for watching for candlestick buy signals. It can be easily assumed that if mail order catalog companies or online companies are seeing dramatic increases in sales, then the transportation/delivery industry could be expected to perform better.The candlestick charts reveal when new dynamics enter a sector.

When developing a successful stock trading plan, some mild preplanning should be put in place. Although the candlestick signals will identify specific sectors that are starting to perform well, having some anticipation of what those sectors might be helps confirm establishing positions in those sectors when the signals do appear. Always keep in mind that prices move based upon the perception of changes in fundamentals. Currently, confidence is coming back into the electronics industries. This may fall in line with the concept that technology is starting to advance at a very rapid pace.

The most successful stock trading program for 2006 may be a two faceted approach. Candlestick signals can be utilized for identifying the sectors that will make the biggest moves this coming year. Also, they will identify the individual stocks that announce product advances which may not only dramatically change their own fundamental capabilities, but may also alter the dynamics of a whole industry.

Market direction - The bullish signal that made itself evident on the first day of trading this year has produced very strong profits in the portfolio. Having the ability to visually witness what investor intentions were from the first day of trading created an opportunity to be investing aggressively, the portfolio positioned all to the long side. Knowing the truisms found in candlestick analysis has produced some very large gains in positions. The longer a trend continues, the more confident the average investor will exhibit. Where do most investors buy? They get more confident at the top. Does this imply that the top is getting close? Not necessarily, but the effects of continued confidence can be seen from candlestick chart patterns that revealed the buyers coming in early and continuing their buying. That can be clearly witnessed in a couple of our recommendations.

DTPI has been in a slow and steady uptrend for over a month before it was finally discovered by an analyst to recommend it. Candlestick signals alerted investors to start buying, if they did not get in at the $6.50 level, at the $7.50 level or the $8.00 level. CRYP was identified as a buy in mid-December and created another buy signal at the first of January. IIJI is another chart pattern that is revealing strong potential to the upside, a fry pan bottom forming off the 50 day moving average.

Will candlestick signals always find the best trade situations? Not necessarily, however the signals do identify where the buying pressures and the selling pressures are being viewed. Executing positions based upon candlestick signals puts investors in  high probability situations. The reason for buying may not be known, but the information conveyed in the signals reveal the information that most investors are looking for. That somebody has a reason for buying that position.

Can markets go straight up? Very rarely, so it would not be unusual to start seeing some profit taking occurring in these markets fairly soon. However, the fact that the markets are usually selling off early in the day indicates that some profit taking is occurring. Then when the buying comes back in the latter part of the day, this reveals a very healthy market environment. Continue to stay long in positions that have not demonstrated any toppiness.

Price patterns - A major advantage of an extended trend in the markets is that investor sentiment starts to develop trading patterns. These candlestick chart patterns can be much more easily recognized and utilized when applying candlestick signals. The information revealed in the signals helps an investor identify a highly profitable pattern in its early stages of development. This information has two basic benefits. It allows the investor to identify and participate in high profit trades. It also allows the investor to analyze very quickly when that trading pattern is not developing as it should. The candlestick signals reveal when it is time to get in as well as when it is time to get out. This provides a very simple stop loss procedure. Utilize the knowledge that is put into the Candlestick Forum's training CDs. Learn how to use the Scoop Pattern, The Jay-hook pattern, the Belt Hold pattern and The Cradle pattern to effectively produce very large profits. Click here for our Video Specials

Please note - We will not hold a live stock chat session on Thursday evening, January 12th. Stephen will be at the Houston Wealth Expo. The next scheduled stock chat is January 19, 2006.

Good Investing

The Candlestick Forum Staff

Newsletter - stock trading plan - January 11, 2006