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May 10th Market Wrap-Up

Candlestick charts reveal a new dynamic in the market trends. Over the past four months, the market indexes have been in a sideways/wedge formation. Last week, as the markets attempted to break down through the bottom of the wedge formation, that failure was illustrated by a hammer signal followed by a bullish confirmation. This brought investor sentiment back up into the middle of the wedge formation. The past five trading days have not only brought the Dow up to the top of the resistance level, the top of the wedge formation, yesterday's bullish trading breached the top of the wedge formation. Today's positive trading confirmed a new investor sentiment in the markets. The bullish trading of the past two days is an indication that the next bullish wave may now be in progress.

The breakout of the wedge formation in the general market indexes provides the market atmosphere to allow individual stocks to break out of their resistance levels. Knowing the bullish sentiment that was created in the general market allows the candlestick investor to establish bullish positions at the appropriate times. A breakout of a resistance level following a candlestick buy signal produces not only a bullish trade but a strong bullish trade. This was visually apparent when analyzing the candlestick charts on stocks such as AAPL and SQ. Knowing what should occur at breakout levels based upon what the individual candlestick formations are revealing allows for the exact entry timing both for purchasing stocks and options. This is what creates the high probability trades set ups utilizing candlestick analysis.

 

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Good Investing,

The Candlestick Forum Team

 


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