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April 17th Market Direction

What made the market go up so strong today? Probably the same rationale that made the market go down so strong on Thursday! Nothing definable. With the market continue up from here tomorrow? There is nothing in the index charts that indicate any consistency in investor sentiment. After today's positive trading, the only consistency that can be recognized is the sideways motion of the market. Today's positive trading did not create a candlestick reversal signal. What does this indicate? Simple logic dictates that a trend reversal has much higher probabilities of performing when a candlestick signal is identified. A positive trading day, without the appearance of a candlestick reversal signal, is much more likely to merely indicate a bounce in a trend or the lack of any sustained trend movement. This can be assumed by common sense. If today's positive trading indicated a strong reversal in the current downtrend, 400 years of evaluations from Japanese Rice traders would have produced a name and an explanation of today's positive trading signal. The lack of any identifiable signal indicates there is nothing major as far as a trend reversal from today's candlestick formation. This knowledge prepares investors for not jumping in to the market with both feet until there is a confirmed reversal signal.

Without any definable trend, the highest probability trades still remain the recognizable candlestick patterns, scoop patterns, J-hook patterns, and frypan bottoms. Without investor consensus in this market, continue to have both long and short positions in the portfolio. Candlestick patterns dramatically improve the probabilities of being in profitable trades at the appropriate times. The simple fact that a candlestick pattern is recognized is due to the fact the pattern produces high probability results. Distinguishing between trend movements that are produced by a candlestick pattern or the lack of a candlestick signal/pattern allows investors to pinpoint which trades have the highest probabilities of producing profits.

 

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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