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July 6th Market Wrap-Up

Market reversals and trends show very distinctive signals when using candlestick charts. The indecisive slow uptrend of the market indexes over the past few weeks was based upon the lack of consensus of any reversal signals in all the indexes. When some of the indexes are trading positive while other indexes were trading lower was an indication there was no major change of investor sentiment, merely shifting from sector to sector. Today's trading had a completely different scenario. The Dow traded lower after hanging man signal and a close below the T line. The S&P 500 gap down from a Doji at the T line, indicating a dumpling top. The NASDAQ formed a bullish Harami yesterday at a potential support level. But today's gap down below yesterday's open show the nonconfirmation of the bullish Harami and indicated a bearish trend kicker signal to the downside. The transportation index formed a Doji yesterday followed by a gap down and lower selling today. When you add all these evaluations together, there was investor sentiment being taken control by the Bears across-the-board. This now becomes an indication that there has been a change of investor sentiment. This would prompt investors to close out long positions that were showing sell signals and closes below the T line and being prepared to scan for short positions. The executioner short positions now become a priority based upon a lower open in the markets tomorrow.

How do you know when to close out long positions? The T line makes for a very simple stop loss strategy. Steady uptrending positions that have been using the T line as a support level allows the candlestick investor to put stop loss protection at very logical levels. As illustrated in our IMMU Steady Eddie position, simply placing a stop loss below the T line would indicate there had now been a major change of investor sentiment, it was time to take profits. Because candlestick analysis is based upon common sense evaluation utilizing the graphics of human nature, entry strategies and exit strategies can be implemented with very simple common sense applications.

 

 

 

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Good Investing,

The Candlestick Forum Team

 


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