Trading Oil StocksIn trading oil stocks and trading oil futures traders have been keeping tabs on the violence in Libya. Using technical analysis with Candlestick stock charts they gauge evolving stock market and commodity market sentiment. Fundamental analysis of this situation is fairly basic. Political unrest in the North African oil producer threatens the production, refining, and export of crude oil and its products. For Shell and Exxon-Mobile, who have recently reentered Libya, one might expect the Libyan unrest to be a threat to production but for other producers outside of Libya a rise in oil prices due to Libyan problems could be profitable, at least in the short term. As in all such situations the news drives the prices of stocks and futures. However, the fundamentals are typically discounted very quickly. As such it is through the use of Candlestick analysis that stock traders can anticipate the next movement in stock prices and profit accordingly in trading oil stocks.
Commodity traders as well as stock traders will likely view the Libyan situation as a temporary trading opportunity in trading oil stocks as well as oil futures. Like the recent unrest in Egypt the mass demonstrations may well be resolved peacefully and may have no effect upon oil production and export. As such, stock market investors may profit from short selling when prices have been driven up by the news, if indeed they are correct in thier believe that prices of oil and oil stocks will settle down again. For trading in companies doing business in Libya, whose stocks may be depressed by this situation, it may present an opportunity for buying at the bottom of a news-driven dip in stock prices. Again, the fundamentals tend to be discounted by the market quite rapidly so the best bet for profits tends to be to watch the market with Candlestick pattern formations. The investor can use Candlestick trading tactics to garner short term profits from this unstable situation in trading oil stocks due to the situation in North Africa.The flip side of trading oil stocks in this situation is trading stocks that are affected by high oil prices. As oil prices jumped six percent on the news from Libya, stocks fell and continued to decline even as oil prices pulled back a little. As usual long term investing is threatened by events that threaten the economy over the long term. Day trading, on the other hand, can be profitable in both the ups and downs of the economy. Here we get back to the advisability of using technical analysis tools such as Candlestick patterns to read market sentiment as events such as the Libyan situation unfold. In trading stocks or futures in unstable situations such as that in Libya options trading can be useful. In trading options and buying calls or buying puts on a stock or on a futures contract the trader essentially buys a little insurance with his premium. If he expects the price of a stock to go up he will buy calls on the stock and if he expects it to fall he will buy puts. In either case he will profit in trading oil stocks or other stocks with options if the price moves as expected and will only sustain the loss of the premium paid if the price moves contrary to his expectations.
Market Direction: The advantage candlestick signals provide to an investor is the identification of which direction a price trend will move. The past two weeks developed a sideways trading channel in the Dow. The whipsaw action warranted either being completely out of the market or 50% of the portfolio long with 50% of the portfolio short. During these market conditions there is no benefit created by candlestick signals or any other technical trading method. The advantage comes from the evaluation of the formations that traded outside the trend channel. Although there was some strength on Friday in the Dow, right at the 50 day moving average, it did not produce a bullish reversal signal. It was merely an up day in a downtrend.
The downtrend in prognosis was still a viable direction based upon the stochastics still heading down. Also, the fact that the NASDAQ gapped down was a confirming indication of the strength of the bears. Each individual formation/signal provides valuable information. However, it has to be evaluated in the context of the general trend. A candlestick reversal signal requires some additional confirmation, usually in the form of the direction of the stochastics as well as the strength of the signal itself.
Assuming the trend was still in a downward direction provided the decision-making input required in specific stocks. Amazon formed a bullish engulfing signal in the oversold condition. This would have led to the possibility of covering short positions. However, confirming indicators needed to be addressed. Trading was still below the T line. Plus the market in general was not showing any potential reversal yet. This made for a much more comfortable reason to continue to stay short until bullish confirmation appeared.
The TCK chart demonstrated a more compelling reason for not moving too quickly on what would be considered an extremely strong bullish reversal signal. Friday formed a bullish engulfing signal after a gap down Doji with stochastics very close to the oversold condition. This would have also been a strong signal pattern to cover short positions. Once again, the evaluation had to include that there was no closed yet above the T-line and the stochastics were not quite in the oversold condition. This would have made the decision weighted toward getting the price one more day before making a decision. Had Monday's trading opened positive, that would have been the final confirming indicator to indicate short positions should be covered.
A major attribute of candlestick analysis is that each formation or signal has an expected result. The results are produced predominantly from the signals themselves. But simple added evaluation using other confirming indicators allows an investor to analyze a price movement with a much greater degree of accuracy. Learning how to master the candlestick signals and patterns is nothing more than to correctly use the information that has been conveyed year after year, decade after decade, century after century as far as how investor sentiment performs during market trends.Candlestick Profits – Eliminating Emotions with Candlestick Analysis - Have you ever cried because you did the same stupid mistake when investing? Maybe not even the same mistake twice, but four or five times! This is not an uncommon phenomenon. The human psyche works completely opposite rational reasoning when one's own money is at stake. Recognizing one's own mental flaws is a giant step toward correcting one's trading program. This book goes beyond that! Not only does it point out common investment flaws, it also shows how candlestick analysis can play a major part in correcting those flaws. Missing out on the Candlestick Forums prerelease sale will also make you cry. The sooner you can take advantage of the powerful insights conveyed in this book, the sooner you will become a much more consistently profitable investor. Do not buy this book 2 weeks, two months, or two years down the road and discover that correcting one of your mental flaws would have saved you thousands of dollars. Hurry to order the new book Candlestick Profits - Eliminating Emotions with Candlestick Analysis before the special end!
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