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January 28th Market Direction

Strong selling in the market! A reversal? Candlestick charts provide a lot more evidence to indicate whether a reversal has occurred. The Dow experienced lower trading after a gap up shooting star signal on Friday. This would be considered a viable reversal signal. However, candlestick charts provide additional information to permit an investor to make a more accurate assessment of overall trends. Although the markets traded lower today, the Dow traded well off its low's, forming a hammer type signal, that indicated indecisive selling. It also close the Dow above the T line. The NASDAQ also formed indecisive trading, albeit lower, with a close above the T line. The transportation index consolidated back to where it used the 50 day moving average and the T line as a support, followed by a close at the top end of its trading range. The fact that the indexes closed near the high end of their trading ranges revealed the Bulls were still present, the selling sentiment was not decisive.

The Doji type formations created in today's trading allows the candlestick investor to be prepared for which direction the overall market may move from here. The Doji rule will indicate the direction of the markets based upon how the premarket futures illustrate which direction the market will open tomorrow.

There were other indicators that revealed bearish sentiment was not in full control. Numerous stock prices, although trading lower for the day, were trading above where they opened. This indicated there was still bullish sentiment in many stock prices. Additionally, easy candlestick scanning techniques revealed specific sectors still showing bullish sentiment even when the overall market was selling off, such as the weed stocks. Gold stocks were trading stronger, evidenced by the fact that the gold ETFs were showing good bullish signs. Because candlestick signals are visual analytical graphics, they make identifying what overall market trends or specific sectors trends much more easy to evaluate. Understanding what each candlestick signal and pattern represent allows the candlestick investor to constantly maintain positions in high probability/high profit trade situations.

 

 

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

Good Investing,

The Candlestick Forum Team


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