Candlestick Trading Blog
July 15, 2008
Bullish
Bullish Markets Characterized by Optimism Bullish refers to having a positive outlook on a particular security or on an investment. The use of this word versus bearish was derived from the way animals attacked their opponents. A bull will thrust its horns in to the air while a bear swipes its paws down. Theses actions are used as metaphors for the movements that take place in the stock market, as well as other markets such as bonds, currencies, or commodities. Bull markets are characterized by optimism and are associated with increasing investor confidence. As a result, investors are encouraged to buy in anticipation of future capital gains. Conversely, bearish markets are accompanied by pessimism and investors anticipate further loss which then motivates them to sell. The Secondary market trends are a temporary change in price within a primary trend. They can last a few weeks to a few months. A temporary decrease during a bullish market is called a correction, and conversely a temporary increase during a bearish market is called a bear market rally. It is interesting to note that as trends begin to appear in stock charts, analysts will debate on whether or not the trend is a correction, or a rally, or rather a new bull or bear market. Sometimes a correction will foreshadow a bear market. The definition of a correction in the market can be characterized by a drop of 10 to 20% over a short period of time. Investors will frequently confuse bear markets with corrections, but a correction is different than a bear market because it contains a smaller degree and duration. In other words, corrections are must shorter lived whereas bear markets occur over a longer period of time. When patterns form on stockcharts, such as candlestick charts, most require a bullish confirmation. Without the confirmation, these patterns would have mere implications of a support level and would be considered neutral. Japanese candlestick patterns typically will have this type of confirmation within in 1 to 3 days after the pattern, if it is in fact confirmed. This time period is typical for candlestick patterns because they are short-term and only effective for 1 to 2 weeks. The most famous bear market in history was between 1930 and 1932 and marked the start of the Great Depression. This market also occurred at a milder level from about 1973 to 1982. Again, it is important to understand that a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a definite period of time. You must learn to differentiate between this market and that of a correction. Continue to study both markets in order to fully comprehend the characteristics of each. This article only provides a brief glimpse of the potential state of the markets however every investor should study them deeply before they begin to trade stocks, trade commodities, and also foreign currencies. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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