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Investing with Candlesticks

Conservative investing and saving is becoming popular in light of the recent market crash and slowly recovering economy. Balancing a stock portfolio with a mixture of growth stocks, dividend stocks, small cap stocks and large cap stocks is a traditional approach to long term investing. A smart addition to long term conservative investing is investing with Candlesticks. Investors use fundamental analysis in picking stocks with a margin of safety and intrinsic stock value. This approach is good for picking promising stocks for the long run but requires two things to make it ultimately successful. First of all stocks fluctuate in price. Market sentiment varies on even the most stable of stocks. Because an investor wants to maximize his profit in buying stock, investing with Candlesticks is a good strategy. Using Candlestick analysis, an investor can profit from buying at the bottom of a price curve. His long term goal may be to have a steadily growing stock but his short term goal is buying stock at the best available price. Even the most promising of stocks may run into trouble. Thus it is important for investors to routinely do both fundamental and technical analysis on stocks in their stock portfolio. If a stock's margin of safety disappears or if estimates of its forward looking earnings start to sag the investor may wish to sell stock. Investing with Candlesticks helps. With the use of Candlestick stock charts it is possible to read market sentiment and exit stock positions most profitably at the top of market trends before market reversal.

By investing with Candlesticks, long term investors can take advantage of periods of market inefficiency to pick up good long term stocks at low prices. For example, a growing stock may get caught in a market correction. All of the fundamental analysis in the world may not tell the investor what this stock will do in the next hours or days. If an investor wishes to avoid taking a big loss during a market correction he will often be best served by putting on his day trader hat and investing with Candlesticks. Using Candlestick patterns as a guide it is possible to anticipate stock price changes in even the most confusing of markets. Will the stock in question resume its rise or will the market take it down with a vengeance? By investing with Candlesticks an investor is using the past as a guide to the future. Because stock price patterns repeat themselves it is commonly possible to read the first segment of the pattern in order to anticipate the last segment. The market quickly discounts changes in fundamentals but big changes in fundamentals often lead to a period of market inefficiency. Using Candlestick charts an investor can buy, sell, or simply watch, based upon time honored technical analysis provided by the Candlesticks. Investing with Candlesticks as a guide is an excellent means of extending the profits that investors hope to gain with sound fundamental analysis and a balanced stock portfolio.


Market Direction: The Japanese Rice traders accurately evaluated what will occur during specific market conditions. They have professed that when you see indecision, there is usually going to be a change of investor sentiment. That was clearly illustrated with the huge bullish and bearish days this past week. When one day is down 600 points, the next day is up 500 points, down 400, up 400, that obviously illustrates the investors do not have a decisive sentiment. Indecision can occur in a weeks worth of oscillation or in a few days of Doji's. They both represent the same thing.

The market should continue in a trend as long as it stays above the T-line. However, the S&P 500 and the NASDAQ started the uptrends without a clear or decisive candlestick reversal signal. This still leaves the possibility of a trend failure or a double bottom set up.

Good Investing,

 

The Candlestick Forum Team


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