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How
Any Stock Trader Can Find the Stock Market
Trend Using Candlestick Analysis
Analyzing candlesticks allows any stock trader
to easily discern the stock market trend,
without having to listen to the rhetoric of
the “experts” projecting what the market is
going to do, which is usually wrong. Their
recent commentary has foretold of the market
"running out of steam, and a pullback
is in store for sure". Yet the candlesticks
show the astute stock trader a much different
story of the underlying stock market trend.
Since the strong bullish Hammer signal of
early March, the DOW had had a nice, consistent
bullish uptrend. The top was evident with
the Doji, confirmed in mid-June. After the
pullback to the beginning of July, the DOW
has moved sideways. The candlestick formations
show a trading range, not a selling atmosphere.
This consolidation can be reasonably construed
as a resting phase in an uptrend.
That assumption is easy for the stock trader
to see when the stock market trend charts
are analyzed using candlestick formations.
The low points are followed by bullish candles.
The tops are illustrated with Doji’s and Shooting
Stars. This combination reveals that neither
the selling nor the buying was long lived.
So what does that do for a stock trader investment
program? It allows us to step back and see
what the stock market trend is doing. The
last four weeks show an obvious conclusion.
This market is not in any hurry to go one
way or the other.
So what does the stock trader do with that
information? It becomes immediately apparent
that the same profit potential is not available
as in the strong upwards stock market trend
from March to June.
The reason? We may just be in the "summer
doldrums". When you witness a period
that appears not to have the potential as
other time frames, that should be a time to
relax. Go do something else. The expert stock
market trader knows that investing in the
markets does not mean squeezing every possible
dollar out of the market. Some time frames
become opportunities to go refresh, recharge,
get away from the market for a few weeks without
missing anything.
Knowing that the market does not have a trend,
utilizing the signals becomes that much more
beneficial. The buy signals should depict
the stocks/sectors that have money flowing
to them. The short signals show the stocks/sectors
that money is being withdrawn from. The smart
stock trader will place trades in both of
those directions and will benefit from the
signal probabilities without the influence
of a strong market direction having to be
accounted for.
While the DOW charts have been flat, the Nasdaq
is a different story. It has had a nice run-up
in the month of July with a sell-off in the
past week or so. Now we are seeing signs of
a J-Hook pattern in the NASDAQ stock market
trend. This is demonstrating some of the stocks
that were the big percentage winners in the
last bull market are now getting new interest
after a three-year respite. AMZN, EBAY, many
Internet stocks, and Semiconductors are starting
to pick up strength.
This analysis is easy for the stock trader
who understands the candlestick buy signals
showing up in the sector charts as well as
the individual stock charts. There is a huge
advantage in knowing the direction of the
stock market trend and knowing which stocks/sectors
are gaining buying interest. Pinpointing those
stocks allows the candlestick investor to
maximize the use of their investment funds.
The charts provide some indication that the
consolidation may be running its course. Watch
for a new possible burst of buying over the
next couple of weeks.
How The Best Stock Trader In The World
Finds The Best Stocks While Keeping Things
Simple
You may or may not have heard of him, but
Dan Zanger could arguably be titled "The
Best Stock Trader In The World". This
is based on his unofficial world record of
trading stocks, turning $11,000 into $18 million
in 18 months (with a return of 164,000%).
This amazing record first hit the media in
the December 2000 issue of Fortune magazine
in an article entitled "My Stocks Are
Up 10,000%!". Not mentioned in the article
was that in 23 months, his account was worth
$42 million.
With that kind of record, you might think
Dan has a massive, mainframe computer-based
system that crunches hundreds of variables
per day to spit out the best stock picks for
that day. Or at least a dozen or so different
technical analysis tools that he uses. Well,
you would be wrong.
What does Dan use? Surprisingly, very little.
First, no indicators whatsoever. He only looks
at chart patterns, price and volume. That's
basically it. As far as trading tools, he
does admit to using AIQ's proprietary moving
average trading bands, which are similar to
Bollinger Bands. He pays attention to support
and resistance levels, but does not use Fibonacci
except in the cases of bear markets/corrections
and on the leading averages during pullbacks.
And what about candlestick charts? Well, we
wish we could say he uses them exclusively,
but he mainly uses bar charts. But he does
admit to knowing what "candlesticks are
all about and using that knowledge in viewing
and interpreting my daily bars".
The lesson here is what we try to preach ourselves.
Keep it simple! You just do not need dozens
of variables that all have to confirm your
stock selection as a viable investment. That
only leads to information overload, confusion,
and "paralysis of analysis".
We are not saying don't pay attention to any
of these other variables. In fact, we encourage
our Members at all times to test some of their
favorite technical analysis tools, but always
using candlesticks as the basis. And some
of our Members are starting to develop some
fascinating test results, and are freely sharing
these results with other Members.
Bottom line, if the "Best Stock Trader
In The World" likes to keep things simple,
that is good enough for us. This also allows
the nightly scanning of many more stock selections
in a much more timely fashion!
How The Stock Trader Can Take Advantage
Of The Summer Doldrums
So, if we are in fact right "smack-dab
in the middle" of the summer doldrums,
here is what we suggest the stock trader to
do in the meantime. Take Steve's book "Profitable
Candlestick Trading" and head to the
nearest hammock or beach chair and read it
again. We guarantee you will see new information
you completely missed the first or second
reading.
Or, take some of our e-books and read them
again. Even better, play with some new PCF's
with TC2000 or TCNet. Just let us know if
you are ready to get started with TCNet -
we will gladly get you set up.
Use the summer doldrums to "sharpen your
axe" and be ready when the market "players"
get back from vacation - usually just after
Labor Day. You'll be glad you did!
New E-Books For The Expert Stock Trader
Speaking of E-Books, we are ourselves taking
advantage of the summer doldrums to write
some new ones. We are just a few weeks away
from completing our "How To Use Stop
Losses With Candlesticks" and “Profitable
Option Strategies Utilizing Candlestick Signals”
e-books. In fact, most of this information
will be provided to the Members Only in the
chat sessions over the next few weeks, once
we select our new chat room vendor. So Members,
stay tuned for that!
Candlestick Lesson Of The Week - More Information
On Everyone's "Favorite Stock" -
AVII
Due to the heavy interest in AVII, we are
making a special mention of it in this ezine.
Because the position is oriented towards the
longer term hold, now six weeks to three months,
the interim sloppy period of the last month-and-a-half
can be used for analysis, now that we can
use it as a hindsight example.
Note that on the day following the big spike
up on April 28, 2003, it formed a Doji/Harami
in the middle of the large white candle. That
indicated the buying had stopped for the time
being. It took another month and a half to
make another run for the $7.00 level. Again
it failed. The stock trader had signs - a
Spinning Top confirmed on June 13 that the
sellers were stepping back in.
July 22, 2003 now shows the lower end of the
trading range - the capitulation - on big
volume. This should have gotten the weak investors
out of the stock. Now is the time to watch
for the next run-up.
Why Now Is The Best Time Ever To Become
A Candlestick Trading Forum Member
No sales pitch again this newsletter! If you
need further reasons to join our group, just
re-read all of this issue, and you will begin
to realize the value of a Candlestick Trading
Forum Membership. It is much more than just
stock picks! It is a complete education in
becoming an expert stock trader. For more
information, please read about becoming a
Member in the Become
A Member! section of our website.
In Conclusion...
I am heading down to Panama this Sunday for
a week. My wife and I are buying a villa on
the beautiful island of Contadora, off the
shore of Panama City about 42 miles - a 15-minute
plane ride.
This is a dream come true for me and Barbara.
And it is being made possible from profits
made from the stock market.
There is absolutely nothing stopping any one
of you out there from using the stock market
to attain your own dreams. Well, there may
be one thing - your belief system. If you
don't believe it is possible, then you will
be proven correct.
I am now living proof that "this stuff
really works"! Join us on the path to
your dreams today. Learn the simple system
that can start you on that path. We will gladly
teach anyone who really believes they can
become a successful Candlestick Trader!
God Bless!
Good Investing,
The Candlestick Forum Staff
www.candlestickforum.com |
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