Picking Stocks For Tomorrow Using Japanese Candlesticks Today
When picking stocks, your energy and time are better spent not worrying about the big ones that got away. Instead, the best investment advice I can give you is to use these two important personal commodities to find tomorrow's winning stock picks.
If you are looking for individual sectors or stocks as investment options, start by thinking about what people are going to need more of in the near future and try picking stocks of companies that are leaders or trying to become leaders in those areas.
Some investors don't want to mess with their portfolios and just want to try a small short-term gamble on something. This is perfectly OK, and probably prudent. The important thing is to know the difference between long term investing and short term investing because your stock picking goals with the two will probably be different.
A short-term speculative play with a loss of 10% might be too much of a loss because the idea of these plays is to get in and out very quickly because of stock volatility. And if you take hits of 30% to 40%, it won't be long before your speculative capital is gone. Your long-term investments could probably survive a 20% drop in value if you are holding them for over 10 years.
Today is the time to think about the next big market downtrend because successful traders know it has to hit sooner or later. Some of the big name growth stocks may seem too high today, but for whatever reason, if they begin to head lower you should start to consider at what price level you would enter them and commit to buying them.
And remember that some people cannot make investment decisions because they think they can never do enough fundamental and technical analysis research in order to be confident about picking stocks. Face reality, we can never be absolutely sure of our stock picks because all of our investments involve some element of chance, greed and fear.
As long as you don't put your entire stock trading plan in jeopardy, you may want to occasionally try picking stocks based on one of your hunches. Many times your instincts are right and when they are not, you can use this knowledge to learn how to invest better and make wiser stock picking decisions in the future.
Market Direction: Without the benefit of candlestick signals, today's market trading would not have been very informative. Most investors would look at today's action as a flat trading day, not showing very much as far as market direction. Fortunately, candlestick signals provide much more valuable information than normal charts.
The Dow showed a Bullish Harami signal on Friday. That in itself indicated that the selling might have stopped. More evidence was the fact that the signal occurred right on the 20 day moving average.
DOW
The NASDAQ showed a slightly positive day on Friday although it was not a convincing reversal signal. However, more bullish confirmation was seen on Monday's trading with the NASDAQ forming a Bullish Engulfing signal right on the 20 day moving average. The Dow showed some weakness early in the day but reversed as it touched the 20 day moving average. This produced more opportunities for stochastics to start flattening out and lose its downward trajectory. Visually, it can be quickly analyzed as the 20 day moving average appears to be acting as support in this latest uptrend.
Nas
A broader analysis of the NASDAQ clearly shows strong gaps up from the 20 day moving average in early August. Now it has moved back to where the 20 day moving average has caught up with it. A strong bullish engulfing signal at that level produces evidence that the uptrend should continue, probably up toward the 200 day moving average again.
What becomes a high probability stock chart pattern? A stock price that is performing in the same manner as the markets. The THC chart reveals the same price movement as the NASDAQ chart. A strong price move after a candlestick reversal signal near the 20 day moving average. Sideways movement until the 20 day moving average comes in contact again. The moving averages become more revealing when trading the THC chart. A gap up after a Doji through the 20 day moving average followed by a gap up through the 50 day moving average became clear evidence that neither one of those moving averages were now acting as resistance. The 200 day moving average showed signs of resistance for a couple weeks. But note what happened after the price broke through the 200 day moving average. A confirmed Hanging Man signal reversed the trend. Click here for more information on the Hanging Man training CD.
THC
The pullback showed indecisive trading as it approached the 200 day moving average. A simple rule for price trends, once a resistance level is breached, it will usually act as support. A Bullish Engulfing signal forming on the 200 day moving average after a Doji AND the 20 day moving average just crossing through the 200 day moving average produces very compelling evidence that the next uptrend is about ready to commence. This is not rocket science. This is utilizing the information provided by candlestick signals at important technical levels. Utilizing candlestick signals in conjunction with moving averages and other technical indicators that are watched by many other technical investors provides instant insights into the next price moves. These price patterns become very easy to identify especially using candlestick signals. Click here for High Profit Patterns training CD special Advanced Pattern Package. Taking advantage of the knowledge incorporated into the candlestick signals produces extremely high probability trades. The analysis of the THC chart reveals that the nine-dollar area becomes the next probable target. The fact that it is now trading above the 200 day moving average makes this stock a bullish trending stock over the long-term.
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Good Investing
The Candlestick Forum Staff