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May 15th Market Direction

Each candlestick formation provides valuable information. Last week, the Dow and S&P 500 pulled back. But if you know the makeup of a Doji, the pullback was insignificant. A Doji represents indecision between the Bulls and the Bears. When a market/price poles back while illustrating indecision, it makes it much more evident that the selling pressure is not relevant, probably merely profit-taking. This information allows the candlestick investor to be prepared to buy based upon the next bullish signal, as the markets indicated today. And it allows investors to maintain bullish positions even though the market is showing indecisive selloffs, as long as the bullish positions remain above one of the most powerful trend indicators, the T-line. During the pullback of the Dow and S&P 500, the NASDAQ continue to trade above the T-line. This combined analysis of the indexes merely indicated there was some consolidation in the markets but not any major change of investor sentiment.

A slow market trend may not be productive for most investors, but for the candlestick investor who is aware of which patterns are breaking out, it produces extremely strong profits. The benefit of being able to analyze that although the markets are not moving up, they are not demonstrating any strong selling pressure. This means bullish candlestick patterns, such as the frypan bottom breakout's and J-hook pattern breakouts are going to produce extremely profitable trades because there is nothing slowing down the bullish sentiment. Continue to stay predominantly long in this market, as long as there is not a candlestick reversal signal and a close back below the T-line. When market conditions demonstrate the lack of any selling pressure, that is when investor enthusiasm will create big price moves. Candlestick signals and patterns capture that information before it happens.



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Good Investing,

The Candlestick Forum Team

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