Stock Market Basics Revisited
As the days get shorter and the seasons begin to change, another rite of passage occurs. Junior is packing his lunch and books for the trip back to school. While the average adult no longer visits a classroom, the average investor can always use a little help with investing. Revisiting some stock market basics from time to time can be very beneficial.
Stock Market Basic 1: Volatile Markets Make Bad Stocks Look Good
Always remember, if it walks like a duck and quacks like a duck, it’s probably a duck. This stock investing concept is obvious to the seasoned investor; active markets lure the investor with promise of great gains. Just because a company can gain funding doesn’t insure that it has a solid business plan or is a strong investment option. A plan such as the candlestick basics should help even the most experienced investor avoid this pitfall.
Stock Market Basic 2: Investing is a Game of Chance
Gambling (interpreted as day trading, IPO flipping, buying on hot tips, etc.) is best left at the poker table for the average investor. The dynamics of the market may change, but the basics of stock market investing are always the same. Investing requires insight, and not just the hot new buzz of the day. It requires a plan for long term investing.
Stock Market Basic 3: Follow the Beaten Path
The market has been a saga for years. Fortunes made and lost, ups and downs experienced, and in the end, most of the tried and true rules remain for true. This basic stock market principle is not lost on the giants of investment, who consistently find the highs and lows in the market and capitalize on them. Whether investing in currency trading or option trading, the lessons learned by others and passed down are almost always the best.
Stock Market Basic 4: The Job is Always Easier with the Right Tools
This lesson conjures images of being under the hood of that old car, but the stock market principle here is directed to stock market trading tools used in working the market. There are many programs available, all of which offer their theories and charts to add credibility to their claims. Finding a proven system using candlestick trading tactics is exactly the tool needed to make your goals in the market a reality.
Stock Market Basic 5: Why do the Answers Change as Soon as I Figure Out the Questions?
Asking intelligent questions of people who have been in the stock market community for awhile is a great resource and it is the final basic stock market principle revisited. FAQ’s, expert’s columns, stock market newsletters and the like are prime examples and excellent resources for learning what has worked for others.
The basics of stock market investing are sometimes tricky, and yet, they are as simple as going back to school. Now, get in there and don’t let any bullies take your lunch money!
Market Direction:
Why are the candlestick signals important when analyzing market trends? Because they give you valuable information at important technical levels. Our analysis, for the past few weeks, has been that the Dow is moving slowly upwards in a trading channel. The NASDAQ somewhat the same. The advantage of candlestick signals is being able to identify what investor sentiment is doing each time it touches the bottom or the top of that trading channel. This last approach to the upward trend line for the Dow has an additional feature. A close above the 11,720 area will be an all-time high. The last time the Dow reached this area was back in 2000.
Today's trading was nudging the top of the trend channel one more time. What type of signal did the trading produce at these levels?
DOW
After trading up most of the day, some selling came in this afternoon. It almost formed a shooting star type signal. The most important word though is "almost". The important factor is that the upward shadow is 'not' two times greater than the body. What should this imply? Although the trading in the Dow was somewhat indecisive, it did not show any definite potential reversal signal. With the stochastics still heading in an upward direction, this would imply at least one more attempt to break through the upper trend line.
The same advantage provided by candlestick signals can be used for individual stocks. What signals form at levels that can be perceived as trendline supports ? Having the ability to recognize the reversal signals at support levels provide opportune times to be buying in a trending stock. a perfect example can be seen in Pozen Inc. chart.
POZN
The same price action of the markets have had in general, Pozen Inc. has followed also. Every time the price came back down to what can easily be perceived as an uptrending support level/trendline, indecisive trading occurred. The confirmation of that indecisive trading as the price cuts the trendline created good opportunities to be buying an uptrending stock at the low points. The importance of understanding and recognizing the 12 major signals creates a huge advantage for the long-term investor as well as the trader.
Will this produce a high flying price move? Probably not! But, it does produce an extremely high-probability trade where the upside projection can be easily targeted. The price moving up to the top of the trend channel, in approximately the $15 area, provides an excellent rate of return for a five to seven trading day holding period.
Learn the highly informational nuances found in each of the 12 major signals. Click here for the 12-CD Set - The Major Signals Educational Package- Website special
Visual analysis can provide a very quick evaluation of when to be in stocks and when to be out. Always keep in mind, the information conveyed in the 12 major signals has been statistically studied and psychologically analyzed by the Japanese Rice traders for centuries. They have provided valuable reversal signals for us to use in successful investing.
Wouldn't you like to know when support and resistance levels are holding? This becomes much easier to analyze when using candlestick signals. If you understand what each signal represents as far as investor sentiment, the analysis of a price trend becomes very easy. Many experienced investors have trading techniques that work reasonably well. They have stated that when applying candlestick signals to what they already know, their correct trade ratio improves dramatically. The information provided within the candlestick signal formations will enhance any trading program.
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Good investing,
The Candlestick Forum staff
Candlestick Signals mentioned in this article are explained in more detail in our Free Resources area.