Learning the stock market is something that most people never master in their lifetime. Although everybody seems to know somebody that has made big profits in the markets, learning the stock market seems to be difficult for the vast majority of investors. Even the so-called professionals tell most investors to put your money into the markets for the longer term. This is because they do not have a better solution. When they were learning the stock market, if they had any guidance at all themselves, it was to find companies that have strong earnings growth. When you find these companies, buy them and hold them long term.

The most supposedly sage advice that we get from investment professionals is that you cannot time the market. That usually comes from somebody that has not taken the time to learn the stock market. Prices do not move based on strong fundamentals. Prices move based on the ‘perception’ of strong fundamentals. When most people are learning the stock market, they are not told how professional investors trade. When somebody tells you that you cannot time the markets, ask them why the names Warren Buffett and George Soros are so well known.

The Candlestick signals make learning the stock market a very easy process. Instead of being taught about what “should” make you money in the markets, the Candlestick signals, when fully understood, what illustrate why you should be making money in the markets. The psychology that is built into the formation of the Candlestick signals is purely common sense investment philosophy put into a graphic form. Learning how to make money in the stock market is a process of learning how to control your emotions.

The Candlestick signals are a graphic depiction of the mass investor psychology. If it is understood that most investors panic sell at the bottom and buy exuberantly at the top, learning the stock market will become extremely easy when applying Candlestick signals to your analysis. Fortunately, understanding the Candlestick signals is not a difficult process. Understanding where and when most investors invest improperly, being able to see that in Candlestick formations, now allows a Candlestick investor to completely reverse their investment perceptions.

Making correct trades - Learning how to profit in the markets is a function of analyzing when it is the proper time to get into a trade. The Candlestick signals represent hundreds of years of visually analyzing formations that signify high probability potential. As demonstrated in the BOOM chart, some very simple trading observations provide the potential to make high profit returns. As seen in the early to mid part of January, a strong Morning Star signal, with stochastics in the oversold area, stopped the downtrend. It also became obvious that the 50-day moving average stalled the upside reversal. One of the simple rules, when applying Candlestick signals to a chart using moving averages, is that the first attempt at a moving average will usually fail. That was demonstrated in mid-January. The second attempt will usually succeed, as seen on the last day of January.

In this case the last day of January formed a very strong bullish candle that gave the indication that the 50-day moving average was not going to be considered a resistance level anymore. The uptrend continued with the expected pullback. A second basic rule is that usually when a major technical level is finally breached, it will come back and test that level. What had been a resistance level now became a support level. Using these techniques allows an investor to fine tune their investment program. Part of learning the stock market is learning how to take your profits and/or reduce your risk. Approximately the fifth day of February revealed a Bearish Engulfing signal after a Doji. Stochastics were in the overbought area starting to turn down. The probabilities say that this is the time to take profits.

The chart graphic illustrates that the 50-day moving average could be the pullback target. Important criteria in that observation is the words "could be". That is the potential support level but nothing is set in stone. Why continue to own a position where the probabilities indicate that it is going to go back down? Take profits and be ready to buy it back if the 50-day moving average becomes the support.

As illustrated in the chart, the 50-day moving average acted as support, the evidence being that the Hammer-type signal and a couple Doji's. The bullish trading off of the 50-day moving average after those indecisive days reveals that the buyers were stepping in. Buying back in at that level creates a low risk trade. A move back down through the 50-day moving average becomes the stop. The upside potential becomes a breach of the $14 area, then the $17 area. The gap-up through the first resistance level, with stochastics starting to turn back up, provides a graphic picture that the buyers are starting to come into the stock with force.

BOOM

We use the BOOM chart as an illustration because the analysis was used for including this as one of our recently recommended stocks. The point for learning how to invest in the stock market is to be able to analyze which stocks give you the best upside potential, both in moving in the correct direction as well as with a strong magnitude to the price move.

The Candlestick formations applied with other technical analysis produce a very strong trading program. Where do people buy? They buy exuberantly at the top. Friday was a day to take more than half of the position off with profits. When a price moves up approximate 30% after it has already moved up nicely, that is the time to start reducing the position. Will it go higher? Could be, but the Candlestick formation clearly illustrates exuberant buying.

Mr. Bigalow wants it to be made clear that this chart is not being used in a bragging manner. The point of using Candlestick signals is being able to identify trades that have high upside profit potential. Do all Candlestick signals provide big profits? Definitely not! But the Candlestick signals put investors into situations that have the potential of creating big profits. Once that trade is working, being able to use the signals to manage a trade is important. Understanding what the signals tell us provides an excellent format for getting out of positions when the probabilities say it is time to get out and getting back in when the signals tell us it is time to get back in.

The Candlestick signals also allow investors to get out of positions that do not work. These exits usually produce flat returns or small losses. This is an excellent method to cut your losses short and let your profits run.

Market Direction - The early part of the week showed severe weakness in the Dow, as to be expected after an Evening Star signal with stochastics in the overbought area. The NASDAQ had formed a Shooting Star that just barely touched the 50-day moving average. That was followed a couple of days later by a Bearish Engulfing signal. This produced a couple down days. Thursday formed a Bullish Engulfing signal with stochastics just getting into the overbought area. The buying was confirmed in the Dow although the Dow stochastics had not gotten back to the oversold condition. In market conditions such as these, the short recommendations of the early part of the week worked effectively but rapidly started showing some bottoming action.

DOW

The recommendation to remain in short positions as well as retaining the long positions this past week was the proper mixture of portfolio positioning. However, the evidence of continued buying on Friday confirmed the Bullish Engulfing signal in the NASDAQ. The buying in the DOW also breached the recent high from the previous week and closed within a few points of the high of December. The confirmation of the Bullish Engulfing signal in the NASDAQ from Thursday would have been a clear signal to start covering short positions on Friday.

NASDAQ

This now puts the portfolio positioning back into a relatively “long” standing. The next logical target is the 50-day moving average for the NASDAQ again. It should imply that the next couple of days, at least, should see positive trading. Unless the NASDAQ breaks through the 50-day moving average with reasonable force, a sideways market may be developing. Fortunately for the Candlestick investor, this makes finding the strong buy and sell signals that much more relevant. It pinpoints which sectors/industries/stocks are performing better than the rest of the markets.

The Major Signals Educational Package - NOW ON DVD!

The response to the 12 major signals CD training program has been astounding. 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.

A New Twist to an Old Favorite!

DVDs of the 12 Major Candlestick Signals - For those of you that would like to thoroughly analyze the 12 major signals, the signals that will perform more reversal patterns prospects than most investors will be able to utilize, the eight hours of concise analysis for each signal is now on DVD's. For the investor who likes to get comfortable in front of their TV screen, this DVD set will provide the opportunity to relax and learn at the same time.

Over $509 of valuable Candlestick signal education, for identifying the most powerful Candlestick reversal signals, is now priced at:

$397.77

Do not delay, gain the understanding of how prices move. This is information that you will be able to use for the rest of your life. The profits that this information provides can be made in your account month after month after month.

Click Here for the 12-Video DVD 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