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July 3rd Market Direction

Usually a day/half day stuck in the middle of a long weekend doesn't show any great movement. Today's strong bullish trading in the Dow and the transportation index revealed the continuation of bullish sentiment. Until today's trading, there was no identifiable trend or pattern in the indexes. The strength in the Dow today is now showing the prospects of a J-hook pattern, with the T line acting as a crucial support level. The benefit of candlestick analysis is knowing what each signal or pattern illustrates as far as investor sentiment. Friday's positive trading Doji, back up in the middle of Thursday's hard selling day, was a candlestick signal indication the selling had stopped. Today's positive trading after a Doji implied a bullish move. Adding the individual daily candlestick formations together makes it much more clear that the T line is acting as support and the indecisive nature of the market may be dissipating. The transportation index is already confirming a J-hook type pattern, implying more upside. The NASDAQ continue to trade lower. The graphics of candlestick charts allows the investor to make a logical assessment of what the overall market trend is doing. The Dow and the transportation index trading higher while the NASDAQ is trading lower illustrates there is not a major change of investor sentiment in the markets, merely a shifting of which sectors are acting bullish and bearish.

Because candlestick analysis is the graphic depiction of human nature, which shows signals and patterns that are going to be reoccurring, knowing when to buy, hold, or sell becomes much more easy to analyze. The T line is a very high probability and powerful trend confirmation indicator. Very simply, a candlestick buy signal and a close above the T line is a very bullish confirmation. As long as the price continues to trade above the T line, without witnessing any candlestick sell signals, the uptrend remains in progress. This becomes a very useful tool for analyzing whether to stay in positions or close out positions, taking profits. This easy analytical process allows investors to assess the direction of the overall market, identifying the strength of the strongest sectors, and then analyzing which stocks in those sectors are acting the strongest. This is a logical process for putting all the probabilities in one's favor. Based upon the current indications of the overall market, the slow uptrend remains in progress with specific sectors acting bullish as well as other sectors acting bearish. Simple candlestick scanning techniques makes it easy to identify each of those sectors.




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Good Investing,

The Candlestick Forum Team

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