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Stock Technical Analysis – Fine Tuned With Candlesticks

Stock technical analysis is made much easier when applying Candlestick analysis. Stock technical analysis is merely applying reoccurring chart patterns that have statistically worked in the past. Whether using trend lines, support levels, resistance levels, or a number of other indicators that have revealed trend reversals in the past, stock technical analysis is greatly enhanced when Candlestick signals are utilized.

Candlestick signals reveal investor sentiment changes. Having the knowledge of what the signals reveal provides much more concise information for analysis of a trend. If a Candlestick “buy” signal is occurring on what other investors are perceiving to be a support level, the Candlestick analyst will have much more confidence that a reversal has occurred. Additionally, the analysis of that reversal can be visually recognized much earlier than other technical investors who need further confirmation.

Stock technical analysis, using Candlestick signals, also can make analyzing a non-trending market much easier to evaluate. The benefit of Candlestick signals is that they can be applied to evaluating the general market trends as well as individual stock technical analysis. The candlestick charts greatly enhance trend analysis

Big profits can be made with Candlestick signals even in a sideways market. The signals reveal immediately when buyers or sellers will are coming into individual stocks. When the market is not showing a trend, the Candlestick signals will clearly reveal which stocks are acting well and which ones should be sold. This allows the Candlestick investor to quickly find stocks that are moving, even in a flat market.

Market Direction - The Candlestick signals work effectively in revealing market reversals. They work just as effectively for analyzing continued market trends. As can be viewed in the Dow chart, three weeks ago the Dow formed two potential sell signals. Two Evening Star signals revealed the potential of a pullback. This analysis, in conjunction with where the moving averages were at the time, provided some simple guidelines.

In mid-April to mid-May, Candlestick “buy” signals were forming on the 500 day moving average. The strong bounce up in mid-May came up through the 50 day and 200 day moving averages. That information provided the insight to analyze that the market was now in an uptrend, the moving averages should start acting as support. It has become evident that the uptrend is now being affected by the 20 day moving average.

DOW

The past two weeks have revealed indecisive but positive trading in the Dow. Friday, a triple witching day, should have produced a very indecisive trading day with the options expiring. However, the fact that it was a relatively positive day, compared to the previous two weeks of trading, and it finally traded above the resistance level, is an important factor.

Bullish sentiment has now moved to new recent highs. This being done on option expiration day and knowing that Crude Oil prices moved up strong, this should be strong evidence that bullish sentiment may be moving the market into another leg up.

The NASDAQ is in the process of forming a J Hook pattern. The support is occurring right on the 20 day moving average with the appearance of some Bullish Engulfing signals and a Hammer signal. Stochastics have curled up as the trading is testing the recent high. This level also saw resistance back in February and March of this year. A breakout above the 2100 level would definitely signify that the next leg up of a J Hook pattern is in effect.

The J Hook pattern results can be seen in one of our recommendations, NDAQ. This trade was highly profitable when utilizing Candlestick analysis. Note in late April how a gap-up from a Doji, right on the 50 day moving average, started the uptrend.

This immediately told us there was a new dynamic in the stock price. Profits were taken in early May with the appearance of an Evening Star signal.

Was that a full-scale reversal about to occur? Maybe or maybe it was just a profit-taking pullback. The Candlestick signals provide a much more clear indication of what the trend will be doing. Note in mid-May how the Doji's and a Bullish Engulfing signal occurred right as the 20 day moving average caught up with the trend. This provided the evidence that a J Hook-type pattern could be in the works.

Reentering the trade at that level provided a nice uptrend until the confirmed Hanging Man signal in the past few days. Profits were taken again at that level. Was that a full-scale reversal or profit-taking in an uptrend? That will be better answered upon seeing what type of signals are created when the 20 day moving average meets the price action.

When do you hold'em and when do you fold'em as the song inquires? The Candlestick signals give you a much better visual format that demonstrates what the investor sentiment is doing during a trend. The probabilities of producing profits are dramatically increased when utilizing the signals.

 

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