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September 25th Market Direction

Market selloff or consolidation? The graphics of candlestick charts make for much easier assessment of what is occurring in investor sentiment. Although the markets have been trading lower over the past few trading days,

There are some significant analytical factors that are seeing much more clearly on a candlestick chart. For example, the Dow traded lower today but traded in decisively, forming a Doji day and closing above the T line. The NASDAQ traded in decisively lower but appeared to use the 50 day moving average as support. The transportation index closed higher. Adding all this analysis together, the market indexes reveal there is no major consensus between the Bulls and the Bears, merely a shift from one sector to another. The candlestick investor can analyze that there is not a major shift of investor sentiment. This allows for the identification of the sectors/stocks that are continuing to act bullish while at the same time analyzing which sectors/stocks are being sold off. When the overall market conditions do not show an overall consensus of a bullish trend or a bearish trend, the simple scanning techniques of candlestick analysis makes it prudent to have both long and short positions in the portfolio.

The benefit of candlestick patterns reveal the development of investor sentiment over a period of time. This usually ignores what is currently happening in the overall market trend. The result of trading candlestick patterns is producing inordinate gains versus merely an uptrending or downtrending stock price. Additionally, the price trend of a pattern will usually persist even when the overall market starts going the opposite direction.

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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