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Finding Profitable Investments

Finding profitable investments requires an investment strategy, skill in both fundamental and technical analysis, and time. Although stock tips can be a fast way to finding profitable investments wise investors and traders will want to be able to confirm with fundamental analysis and technical analysis when picking stocks from even the most reliable source. Using technical analysis tools such as Candlestick pattern formations, a trader can anticipate market reversal and market trends before they happen. In long term investing one seeks to find stocks with years of profit potential. Nevertheless, long term investing can be much more profitable when the investor uses Candlestick analysis to buy stock at the most advantageous price and sell stock at the best price when a market rally has run its course.

Investment strategy will depend upon investment goals. If one is looking for short term profits he will pick different stocks than if he is looking to set up a balanced stock portfolio with retirement in mind. Finding profitable investments must always be balanced with risk management as a single loss in one stock can erase all of the work of balancing a stock portfolio with stock picks from various market sectors and technical stock analysis with Candlestick patterns to optimize profits. The investor will want to decide on a level of risk he is willing to incur in finding profitable investments. Often times the larger profit potential lies with riskier stocks. The long term investor as well as the day trader can commonly limit his risk by close attention to market sentiment using Candlestick chart analysis.

In using fundamental analysis for finding profitable investments the investor looks to the price to earnings ratio to determine if a stock is fairly priced. He looks for a margin of safety such as a cash reserve or unencumbered property. The investor also looks for intrinsic stock value. This is the company’s discounted forward looking income stream. Fundamental analysis seeks to anticipate how a company will be doing in the near term as well as the more distant future. For example, a startup biotechnology company may have one great product. If that product passes all of the tests for efficacy and safety put in place by the Food and Drug Administration the company may reap substantial profits. However, if other companies are on the verge of developing similar and even more effective drugs the first company’s exclusive profits could be limited to a few years.

Investors use technical analysis to gauge market sentiment. In the vast majority of cases the fundamentals that drive eventual stock price are discounted or taken into account by the market very quickly. In our electronically driven world information passes in less than a heartbeat. Thus the task in day trading as well as long term investing is to read the market. Because price patterns in markets tend to repeat themselves finding profitable investments is possible in reading the market reaction to changes in fundamentals. No matter how well versed the investor is in the fundamentals of a stock, using technical analysis with Candlestick pattern formations will most commonly help him buy and sell stocks at the most optimal prices.


Market Direction: Using candlestick analysis to analyze the trend allows an investor to have more confidence and flexibility in their portfolio positioning. Although the markets are back into the over bought condition, there have been no candles/signals to indicate any change of investor sentiment. Also having the capability to analyze the length of the current trend is easy. Anticipating that we are in a wave three action allows for the measurement of the potential upside move. Wave one should be the measurement for wave three.

DOW

Recognizing specific signals and patterns allows for placing high probability trades. Just as the measurement can be made on the Dow trend, that same simple logic can be placed on individual stock analysis. VHC demonstrated a very strong price move from the $12 level to the $27 level. This was the result of a Fry pan bottom breakout. If an investor did not participate in the initial strong move, that does not forgo the possibility of making strong profits from this chart pattern. There is a simple expectation after a strong price move, profit-taking. The visual aspects of candlestick analysis allows an investor to identify the next possible price pattern. A breakout of VHC through the $26.75 level would be a good indication that a J-hook pattern had been completed and the next wave good move with the same magnitude as wave one.

VHC

Having knowledge of the reoccurring patterns created by investor sentiment creates the investment trading platform that produces high probability, high profit trade situations. Candlestick analysis is a credible trading method due to the same investor input year after year, century after century. Whether using candlestick analysis on its own or overlaying it  on existing successful trading methods will dramatically improve an investors ability to produce consistent returns

 

Members training - members, Mark your calendars - May 7 - This will be a FREE three-hour training and review of the 12 major signals. For new members, this is an excellent method for reinforcing your learning process of the major signals. Hearing what occurred in investor sentiment to form the signal at the same time of witnessing what it did as regards of the trend greatly improve your understanding of where and why a trend is doing what it is doing. This becomes extremely valuable analytical information. This information allows investors to master their own investment decisions versus hoping for mediocre results from money managers.

Chat session tonight at 8 PM ET for members.

May 19 2011 - Tina Logan will be the guest speaker for the Thursday night training session. Please mark your calendars.

Good Investing,

The Candlestick Forum Team


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