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January 16th Market Direction

As our morning comments warned, today was a day to expect profit-taking. Why the warning? Because of one of the most basic candlestick analysis. The Japanese Rice traders always profess where do most people buy, exuberantly at the top. Where do most people sell, they panic sell at the bottom. Today the indexes gapped up in the overbought condition. That combination immediately instigates a Japanese Rice trader assumption. It is time to watch for selling. This is not based upon theory. This is the result of hundreds of years of analysis of price movements. Investor sentiment works the same way time after time. If you find yourself asking, "how come when I buy when everything looks rosy, prices move immediately in the opposite direction?" This is because human nature reacts the same way over and over. Candlestick analysis is merely the graphic depiction of what occurs in investor sentiment. The current market trend has not yet been altered with the appearance of a candlestick reversal signal and a close below the T line. Until that occurs, today's trading has to be assumed as being a profit-taking day during an uptrend.

Maintaining long positions is dramatically enhanced by utilizing a very simple indicator, the T line. There is a very powerful implication utilizing the T line with candlestick signals. Candlestick signals are the graphic depiction of human nature. The T line acts as a natural support and resistance level of human nature, with Fibonacci characteristics. When you add the graphics of what is occurring in investor sentiment along with the natural support and resistance level of the T line, you have a very powerful trend analysis combination. Whether your trading candlestick signals as your primary trading method or you overlay the charts of whatever successful trading method you are utilizing, you greatly enhance your analysis capabilities.



We will conduct a "Members Only" chat session tonight at 8:00 pm EST.

Good Investing,

The Candlestick Forum Team


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