There are thousands of so-called experts that provide Stock market research commentary each day, week, and month. The majority of that stock market commentary is based upon somebody's analytical projections/speculations of what might happen in the future. Much of this analysis is based upon the information provided today. Unfortunately, those projections can change dramatically based upon some external event occurring in the worldwide markets or in a specific industry. That means that all stock market research commentary has to be taken with a grain of salt. However, analyzing the candlestick signals provide an immense amount of information that can be used during any time frame. Additionally, the candlestick signals will show you an immediate alteration of the existing market conditions.

The candlestick signals make for a clear evaluation of what investor sentiment is in the markets at this time. The analysis of the signals provided by the current investor sentiment creates a high probability trend projection. The duration and magnitude of that trend can be projected using other indicators that worked relatively successfully in the past. Indicators such a stochastics, moving averages, trend lines and a multitude of other technical indicators they usually has statistical relevance.

The advantage of candlestick signals provides an alert when that projected trend has new elements that have changed investor sentiment.

Being able to analyze what signals were occurring at any point of a trend allows the candlestick analyst to execute trades at the optimal points. Being able to analyze market conditions, using all investment factors that will influence the results of your investments, keep putting the probabilities of producing good returns highly in the candlestick investor's favor.

A simple analysis this past week was evaluating what the price of crude oil would be doing. As noted in the chart, the downtrend from the candlestick sell signals came back to the reasonable target, the 50 day moving average, and did not hold that level. At the same time, both the Dow and the NASDAQ charts had been showing some toppy signals, doji's and shooting stars, indicating that the uptrend may be ready to experience to pullback.

The crude oil chart formed a bullish engulfing pattern that produced an analytical advantage for the candlestick investor. Stochastics were oversold on the crude oil chart. The bullish engulfing pattern came right back up to the 50 day moving average. What do we want to see following a bullish Candlestick signal? Confirmed buying!

Had new buying come in to the crude oil prices the next day, which would've told us that a reversal had occurred and it had done so right at the 50 day moving average.

However, the fact that we saw all prices move lower immediately the following day was a clear indication that the buyers were not willing to step in yet. The sellers were still in control as indicated by the trading the next day at the lower end of the bullish engulfing pattern. Although the stochastics indicate where an oversold condition, there has yet to be seen a confirmed buy signal. The downtrend will remain intact until a confirmed buy signal becomes evident.

Having that information makes stock market commentary a little easier. The next target on crude oil could be the 200 day moving average. If that's the case, the recommendation to stay long in the markets has another reason. Lower oil prices will increase investor confidence. As of now, with no evidence of selling in the Dow or the NASDAQ, holding the long positions is still the right strategy.

Market Direction – the continued rally after the election has had opportunities to take a rest and pullback. However, as seen in the analysis of the crude oil prices after the election, the weak prices in crude has been adding buying strength to the US stock markets. The fact that the Dow has now come up above the peaks of October and September has now altered the oscillating downtrending market that we saw all starting in February. The fact that the candlestick signals have shown strong candles coming up through those levels reveal that there is now a change in investor sentiment. As our morning comments have been recommending for the past two weeks, stay long in this market until a severe candlestick sell signal occurs.

Both the NASDAQ in the Dow showed some toppy signals earlier this week; however they have never been confirmed. One of the basic rules of Candlestick analysis is that the longer a trend persists, the stronger the reversal signal needs to be. That is not too eliminate the probability or possibility that we will see a profit-taking pullback in the near future, however the assumption at this point will be that it is a pullback versus a reversal. Be prepared to take some profits in the near future.

The strength of this market has also been witnessed in the orderly rotation of money flowing from one sector to the next. This is a clear indication that money is not leaving the markets. It is just being repositioned.

Sectors - This week the oil and gas refining and marketing sector started to take up strength.

Having this information makes it easy to start researching the stocks that make up that index. As noted, one of our recommendations this past week was TSO. It formed a bullish engulfing pattern right on the 50 day moving average. The next day there was confirmed buying with a gap up on the open. A gap up reveals that the investor sentiment has now changed dramatically. Witnessing a gap up after a Candlestick buy signal, and occurring right on a major moving average, and stochastics in the oversold area curling back up provided an extremely high probability profitable trade’s situation. Also note in the TSO chart that the bullish engulfing signal occurred at an obvious support level, at the $28 area. Adding all this information into our analysis produces an extremely high probability that we are in a correct trade.

The importance of recognizing the Candlestick signal becomes the first element of identifying a high probability trade. The bullish engulfing pattern, considered one of the major Candlestick signals, historically has produced excellent returns. Understanding how to use gaps at the bottom of a trend provides additional intellectual ammunition to exploit high profit trades.

Keep in mind; fundamentals do not move stock prices. The perception of what the fundamentals will do is what moves prices. Learn the major signals and you’ll have a much greater understanding of how to take advantage of the major reversal signals that occur in the markets every day.

Candlestick Forum CD Training Special – for those investors that want to learn how to use the major signals effectively, the 12 CD set of the major signals is available on the site. Each 45 minute training CD goes in depth into what makes each signal effective, where it occurs in a trend that makes it highly effective, and most importantly what the investor sentiment was behind the formation of that signal. Once you understand the psychology that is built into the signals, you will have a powerful understanding of how price movements occur.

However, if you purchase the full training package before November 19, 2004 at the $397.77 price, you will also receive the “Gaps at the Bottom” training video, a $69.77 value and the attractive Candlestick Forum “Major Signals” poster, a $23.95 value for FREE.

Take advantage of this valuable information special. You’ll receive a $93.72 of additional candlestick education on top of the $111.23 discount on the “Major Candlesticks Signals” training program. Take advantage of this opportunity to learn candlestick signals thoroughly. Candlestick signals produced remarkable results. There is no reason why you shouldn’t fully understand the powerful implications that are conveyed in candlestick signals.

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Good Trading!

- The Candlestick Forum Staff

www.candlestickforum.com