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Stock Market Analysis – A
Candlestick Signal Forte.
Stock market analysis is accomplished
by many methods in the investment arena.
Technical analysis provides a better format
for analyzing overbought and oversold conditions
in the market, much better than trying to
do a fundamental analysis of the markets.
The Japanese traders say "let the market
tell you what the market is going to do."
The utilization of Candlestick signals makes
stock market analysis and price trend evaluation
relatively easy. It becomes difficult, at
times, to sort out what the stock market
indexes intentions are when listening to
the many scenarios from the so-called “market
experts.” Watching the financial news
stations will always provide a multitude
of opinions on where the market is going.
Using Japanese Candlestick signals will
circumvent all that noise.
Being able to do a relatively accurate
stock market analysis provides the Candlestick
investor with a huge advantage when positioning
a portfolio. Candlestick analysis allows
investors to project trend reversals of
the stock market indexes with a relatively
high degree of accuracy. One misconception
about Candlestick signals is that there
are too many of them to learn. Of the 50
or 60 Candlestick signals, there are only
about 12 signals that will occur a vast
majority of the time: the Doji, the Bullish
and Bearish Engulfing signal, the Hanging
Man, the Shooting Star, the Hammer, the
Inverted Hammer, the Bullish and Bearish
Harami, the Dark Cloud, the Piercing Pattern,
and the Kicker signal. Knowing these signals
alone will dramatically improve your analysis
of trend reversals and make learning Candlestick
analysis much easier. Having this analysis
capability in their mental arsenal allows
the Candlestick investor to position their
portfolio in the correct direction when
a move occurs. Understanding the psychology
of how the signals are formed provides investors
with better insight into the proper placement
of positions.
In the process of writing the second book,
oriented towards utilizing Candlestick signals
in high profit patterns, Mr. Bigalow will
be providing much more material in the member’s
area of the Candlestick Forum site. This
information will be illustrating how high
profit patterns can be utilized effectively
for stock market analysis. In the foreseeable
future, members should be aware that new
information will be available more in the
e-book format versus the training CDs until
the next Candlestick book is fully written.
This information should be highly informative
for those trying to learn Candlestick investing.
Additionally, any questions about high profit
signals will be welcomed and appreciated,
for the purpose of making the information
going into the book as clear and understandable
as possible.
High Profit Patterns -
One chapter of the book will be dedicated
to the analysis of gaps. Most professional
investment advisers suggest that investors
stay away from gaps. Supposedly, the risk
of trying to invest after a gap-up or gap-down
is too risky for the average investor. Gaps,
in conjunction with Candlestick signals,
are actually an investor's best friend.
Understanding the investor sentiment that
was involved to create a Candlestick signal
and gap situation provides the biggest profit
potential.
If you understand what forms a gap, then
you can take that knowledge and use it to
your advantage. If you dissect the definition
of a gap, then you can understand why you
want to use it for your own investment purposes.
A gap is formed when the trading of one
time period does not overlap any of the
trading of the previous time period. In
the case of a gap at the bottom, starting
an uptrend after a Candlestick signal, the
gap illustrates that investors want to get
into that trading entity (stock) with such
enthusiasm that they are willing to move
the price up above any price level of the
previous day.
In Candlestick analysis, that is exactly
the price trend that an investor wants to
be in, a trend that is starting with very
strong buying enthusiasm. As can be seen
in our recent recommendation of EXTR, a
gap-up open following a Doji, right on the
200-day moving average, when the stochastics
were in the oversold area about to turn
up, makes for a very compelling “buy”
recommendation. The gap-up on the open clearly
illustrates that investors wanted to get
into this position as quickly as possible.
EXTR
This gives the Candlestick investor the
insight to evaluate that this stock price
probably had supported at the 200-day moving
average and now investment dollars were
coming back into the position with some
force. Four days later, after the price
tested the 200-day moving average once more
but formed a Hammer signal as it bounced
off of the moving average, still gave the
impression that the buyers were affecting
the stock price. Once we saw another gap-up,
a Kicker-type signal, with stochastics still
in an upward direction, creates a very bullish
scenario. The second gap-up revealed immediately
that the buyers were back in again with
enthusiasm.
Do all stock prices have this big percentage
move following a Candlestick signal and
a gap-up? Not always! But the probabilities
are that the opportunity to be participating
in a big move to the upside is in your favor.
The gaps at important levels have significant
meaning. For those who would like to know
more about gaps at the bottom and gaps at
the top, you might want to take a look at
the Gaps Training CDs available on the site.
Using the gaps provides major opportunities
to be participating in the price moves that
can dramatically outperform market movements.
Having the ability to analyze the high profit
patterns, especially using gaps, can create
a very profitable trading program. This
is not rocket science. This is very simple
analysis of patterns that have worked a
high percentage of the time in the past.
Use this information to your advantage.
Market Direction - It
has become obvious that the Dow, although
in an oversold condition, had a hard time
getting above the 10,600 area. What could
have been construed as the market trying
to base can now be analyzed as the market
not being able to move back up. The 50-day
moving average could have been a support
level but now appears to be acting as a
resistance level. The sell signals at the
50-day moving average, then some bullish
signals upon being confirmed, could have
taken the indexes back up to higher levels.
However, as witnessed, the selling pressure
at the 50-day moving average gives a strong
indication that the next target might be
the 200-day moving average.
The Dow
The gap-down on Thursday in the NASDAQ
demonstrated that the sellers were coming
into the market with force. This also would
indicate that the next support level may
be at the 200-day moving average.
The NASDAQ
In market conditions, where the direction
of the market is not clearly definable,
it is advisable to sometimes sit on the
sidelines. This is not the normal strategy
when using Candlestick signals. Even in
flat markets, because the signal is the
cumulative knowledge of everyone buying
and selling that trading entity, there will
be stocks that are moving up with good Candlestick
buy signals and stocks moving down with
good Candlestick sell signals even in a
flat market. There are other market conditions
where sitting on the sidelines is best in
lieu of the risk/reward factor of being
exposed to a very choppy market. As seen
in our member’s comments area each
day, it has been advised to sit heavily
in cash. Any buy or sell recommendations
have been done so with the caveat that if
the trend could not continue, be prepared
to come back out of the positions very quickly.
The point of investing is to put your funds
to work in situations where the probabilities
can be put in your favor. If the markets
do not provide those conditions, then sit
on the sidelines for awhile until some Candlestick
signals clearly reveal whether to be going
long or short.
Hedge Fund - The Candlestick
Trading Hedge Fund prospectuses are being
sent out this week. If you would still like
to request a prospectus, please contact us.
We will get it in the mail to you immediately.
May Cruise
- Final details for the May cruise will
be made available soon on the site. Due
to a problem with getting everybody cabins
with verandas, the cruise, which had originally
been scheduled for March, had to be pushed
to May.
Houston Seminar –
A full two-day Candlestick presentation
seminar is being planned for April in the
Houston area. If you would like more information
or are interested in attending, please contact us. We are still working on the dates and location.
The 12-CD Candlestick Training
Special - The response to the 12
major signals CD training program has been
much better than expected. There has been
strong feedback that the in-depth analysis
of each major signal is done in a clear
and concise manner. The learning process
becomes very easy when all the elements
of what makes for a strong successful reversal
signal to work correctly is explained by
Stephen W. Bigalow. Each 45-minute training
session not only explains what indicators
confirm the effectiveness of each of the
major signals, but it goes into the investor
psychology that was present that made each
signal occur. Understanding the psychology
of investors when a reversal is occurring
is a tremendous insight into what makes
prices move. If you have a few weeks at
the beginning of the year to get yourself
organized going into 2005, then take advantage
of a special year-end offer so that you
can use the major signals effectively for
the rest of your life.
Click
Here for the 12-CD Major Signals Newsletter
Special
You should never be put in a position where
you do not understand why trades are being
made for your account. Whether those positions
are being put on in your managed account,
or a hedge fund, or your own personal trading,
you should have a full understanding of
whether those funds are being put in the
right positions at the right time. The Candlestick
signals applied with Candlestick analysis
will become the education process for understanding
how to maximize your potential returns in
your own trading or being able to analyze
whether a money manager has any concept
of correctly timing the markets.
Good Investing!
- The Candlestick Forum Staff
www.
candlestickforum.com
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