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April 13th Market Wrap-Up

The graphics of candlestick signals make analyzing the market trend very easy. The candlestick signals reveal a change of investor sentiment. Adding very simple trend analysis indicators, such as the T-line, the eight exponential moving average, allows investors to much more accurately evaluate the overall trend of the market. The indexes have been trading below the T-line, indecisively, for the past few weeks. The Doji-type days, just below the T-line, indicated indecision between the Bulls and the Bears. Analyzing that factor alone would not have produced any compelling evidence on which way investor sentiment was going to move the market. Adding the T-line, which is a very high probability factor for indicating the direction of investor sentiment, improved the analysis of the market trend utilizing a very simple observation. A candlestick buy signal and a close above the T-line produces high probabilities an uptrend is in progress. Likewise, a candlestick sell signal and a close below the T-line produces high probabilities a downtrend is in progress. The fact that the indexes have been trading below the T-line for the past few weeks dramatically improves the probabilities that a downtrend was in progress. This type of information greatly improves an investors profitability by knowing whether to have a portfolio oriented to the long side or the short side.

Knowing the overall direction of the market allows the candlestick investor to use the simple scanning techniques to find the best trade set ups. Obviously, with the candlestick sell signals and trading below the T-line in the indexes, scanning for the best short trades to have in the portfolio becomes a higher profit strategy. This does not necessarily mean strong long chart patterns can't be quickly identified but to put all the probabilities in ones favor, going with the flow of the market is more than likely going to produce better profitability scanning for good short trades. Utilizing the graphics of candlestick analysis allows investors to trade with much more accuracy based upon the confirmation of what usually occurs in investor sentiment. This greatly reduces the major trading flaw most investors activate. Hope! Most investors maintain their positions because they hope it will move in the direction they are expecting. Candlestick charts demonstrate which direction prices are actually moving.

Chat session tonight at 8 PM ET with guest speaker Barry Burns. Click here to register.

Good Investing,

The Candlestick Forum Team

 


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