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April 20th Market Wrap-Up

Although the markets have been moving sideways for the past two months, the graphics of candlestick analysis allow investors to have a much more clear assessment of what is occurring in overall investor sentiment. The T-line is a very important element of trend analysis. It clearly indicated it was acting as a resistance level for the Dow and the S&P 500 over the past few weeks. The T-line has a very high probability aspect to it. If a trend is trading below the T-line, the probabilities are extremely high a downtrend is in progress. If it is trading above the T-line, the probabilities are extremely strong an uptrend is in progress. When analyzing the markets in general, candlestick charts give a clear indication as to which direction the trend will be moving. But as seen in the NASDAQ and the transportation index, they have traded above the T-line in a significant number of trading days at the same time the Dow and the S&P 500 traded below the T-line. This provided a very clear trend assessment of the market, it was moving relatively sideways. There was no agreement in all the indexes.

Knowing that the markets are not moving in any particular direction with a consensus of all the indexes indicates there are specific sectors trading bullish while other sectors are trading bearish. Simple candlestick scanning techniques allow you to instantly identify which sectors are moving in which direction. A sideways moving markets allows a candlestick investor to have both strong bullish positions as well as bearish positions established in the portfolio. Recognizing when there is a consensus of the indexes based upon bullish or bearish signals moving the market trend in a specific direction provides the opportunity to close out positions that are now not participating in the same direction as the markets. Currently the Dow, the S&P 500, and the NASDAQ have had bullish trading pushing them towards the upper resistance levels of trend channels. The transportation index is providing a double bottom pattern, and a scoop pattern, that would indicate a slingshot effect to the upside. That analysis provides additional expectations of the other indexes breaking out through the resistance levels. This is not high tech analysis. This is merely applying the expected results of price moves based upon hundreds of years of observations from the Japanese Rice traders.


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Good Investing,

The Candlestick Forum Team


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