The stock market trend analysis, of course, is an important element when developing a trading program. The Candlestick signals, utilized at important technical levels, become an extremely powerful analytical variable. Along with using simple visual indicators to confirm major Candlestick signals, such as stochastics, trendlines, and moving averages, the stock market trend should be the initial factor for allocating positions in a portfolio. Why try to fight the flow? If the stock market trend is up, as indicated by Candlestick signals, obviously a portfolio should be oriented to the long side. If the stock market trend is down, either short positions should be heavily established in the portfolio or, for those that cannot short in their account, sitting in cash should be the strategy. If the stock market trend is sideways, it allows the Candlestick investor to have a mixture of long positions and short positions. This trading strategy would be based upon the rationale that the Candlestick signals are the cumulative knowledge of all the investors buying or selling a trading entity. Buying the long positions that have excellent "buy" signals and shorting some positions that have excellent "sell" signals, with the stock market trend being in a sideways trading range, should work reasonably well.

The influence of the stochastics and/or important technical indicators enhance the probabilities of being able to analyze the stock market trend correctly. Major moving averages have a great propensity to act as support and resistance levels. Learning how to use these moving averages, in conjunction with the Candlestick signals and the stochastics, create a very strong platform for buying and selling at the proper times. Learning how to utilize the moving averages when analyzing the stock market trend increases the potential returns in a portfolio by enhancing the visual aspects of where a reversal is about to occur.

For more information on how to use the moving averages effectively, please investigate our "Candlestick Trades at Major Moving Averages" CD on the site. This is a one-hour video on where the moving averages and the Candlestick signals produce extremely high probability reversal situations. Once you study this video, your eyes will be automatically trained to anticipate where a major reversal will occur.

Market Direction - The stock market trend was affected on Wednesday by the 50-day moving average. One of the basic rules for moving averages is that when a price first approaches a moving average, it will fail. It is usually the second or third time that it tests a moving average that it will go through.

DOW

Tuesday's trading in the Dow closed right at the 50-day moving average. Wednesday, prices backed off most of the day. However, by the end of the day the prices came back up to where the Dow closed within a few points of even. Stochastics are still in an uptrend. This would indicate that there may still be some consolidation here at the 50-day moving average.

The NASDAQ formed a Doji on Tuesday followed by a weak open and selling off on Wednesday. This also indicates that there could be some pullback in the NASDAQ stocks. Evaluating both indexes produce some insights when they are evaluated at the same time. The pullback in the NASDAQ while the Dow seems to be holding steady would indicate that there is no mass selling in this market, just some profit taking causing some consolidation.

NASDAQ

Also, it should be noted that a good percentage of our recommended stocks in the members area have been showing positive results in the past few days. This would be an indication once again that there is not a mass exodus out of this market. With that scenario, it should still be anticipated that the strong charts will act well until there is a definite reversal in this market.

A strong day at the end of the week would lead to the assumption that the consolidation was over very quickly and now the NASDAQ would come up and test the 50-day moving average. However, the fact that we have seen a Hanging Man / Doji signal in the Dow right at the 50-day moving average would be an alert that if the markets open lower on Friday, it would be time to take profits, if they had not already been taken on the open Thursday morning.

Moving Averages and Candlestick Signals - The Candlestick Forum's recommendations come from the analysis of the combination of indicators that not only work often but also provide a high profit potential. It should be noted in the AUO chart that a Kicker signal occurred right at the 50-day moving average. A Kicker signal is a very strong signal by itself. However, if it occurs right on a major moving average, that becomes an even more powerful signal. Our recommendation was due to the Kicker signal occurring at the 50-day moving average with the target being the 200-day moving average. As can be seen, a gap-up through the 200-day moving average produces a new analysis for this trend. The 200-day moving average is now not a resistance, but probably a support level at worst.

AUO

This stock continues to be a hold until a definite sell signal appears. In light of the fact that a Kicker signal started the trend and a gap-up over the resistance level was also involved, the implications are that this stock is in a very strong uptrend. With that knowledge, it now takes a much more convincing “sell” signal to indicate that the uptrend is over.

Candlesticks make analyzing a trend very easy if you just interpret what the graphics are telling you. This is not difficult. The benefit of Candlestick signals is that the investor sentiment is built right into the formations. What normally would have been an alert upon seeing a gap-up in an overbought condition now has a different connotation when a major moving average is involved. The evaluation of what is happening at important technical levels by seeing what the Candlestick formations are indicating greatly simplifies the decisions of whether to hold or take profits. Use the Candlestick signals to your advantage. They have worked for hundreds of years. If you understand them, then you will have tremendous insights into what is going on in investor sentiment during a trend.

Los Angeles - There will be a free Candlestick presentation by Stephen Bigalow at the Keno's restaurant on 5710 La Palma Avenue, Anaheim Hills on Saturday morning 2/5/05 starting at 8:30 a.m. If you can make it, he would like to see you there.

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