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March 6th Market Direction

The markets continue to trade lower. Is this indicating the stepping up of selling? The candlestick investor has the advantage of evaluating what type of signals are being formed in today's trading. Indecisive hammer type signals, illustrating there is not dramatic selling pressure occurring in the market. Additionally, the indexes are trading above where they opened, demonstrating the buyers is still in the market. Finally, the indexes are also appearing like they will close above the T-line. A healthy market trend incorporates profit-taking along the way. The early morning selloffs, followed by buying in the afternoon, indicate profit-taking followed by continued buying. If all the market indexes close above the T-line today, make a simple analysis, the uptrend is still in progress.

How can you tell whether selling in the markets are representing a reversal of the trend or merely a profit-taking pullback? Candlestick investors have a great advantage by knowing what each candlestick signal illustrates as far as investor sentiment. There was the expectation of some profit-taking based upon the gap up in the trend last week, in the overbought condition. The Japanese Rice traders profess that a gap up in overbought condition warrants exuberance, start watching for selling. The past two trading days have been Doji type days. This illustrates the lack of conviction in the selling. This added information conveyed by a candlestick chart allows investors to more accurately analyze individual stock positions to evaluate whether the sellers have taken control or the pullback is merely profit-taking in an uptrend. This becomes an immense advantage for knowing when to close out positions or merely continue to hold until there is a definite reversal.

 

We will conduct a "Members Only" chat session tonight at 8:00 p.m EST.

Good Investing,

The Candlestick Forum Team


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