Being able to analyze markets that influence the stock market provides additional advantage for the Candlestick investor. Being able to evaluate whether the stock market is in an uptrend, a downtrend, or in a reversal period, greatly enhances the ability to maximize profits. The stock market recommendations become a function of knowing which direction a portfolio should be positioned.

The past few weeks, our morning comment recommendations have been greatly oriented towards the direction of Crude Oil prices. For most investors that do not have time to spend hours every day analyzing all of the outside influences that affect the movement of the stock market, Candlestick signals become a very important time-saving feature. The analysis of bond prices, the US dollar, Crude Oil and Natural Gas prices, the Asian markets, or any other investment entities that will have an influence on which direction the stock market will be heading, produces higher probabilities of being in the right direction in the markets and can be done relatively quickly.

Our current stock market recommendations have worked very successfully because we could evaluate what Crude Oil prices should be doing over the past few weeks. Utilizing chart trading patterns is the basis for technical analysis. Candlestick signals provide an extremely valuable element for analyzing what is happening at important technical levels. Most charting techniques are used for finding levels where something "might" change in a trend. Applying Candlestick signals to those techniques create a much more clear view of what is happening in investor sentiment. The signals reveal what is "actually" happening at those levels.

The most obvious chart pattern for the past few weeks has been Crude Oil prices. It has been the basis for our investment strategy during that time. The $55 a barrel price started showing Candlestick "sell" signals on the charts. The Bearish Engulfing Pattern in Crude Oil prices during late October signaled the top. The next question would be: Where would they bring prices down to? The first obvious support would have been the 50-day moving average. Whether shorting Crude Oil prices at the Bearish Engulfing signal or whether using that information to plan an investment strategy for equity trades, the use of trend lines, moving averages, Fibonacci numbers, or any other technical method can be used to estimate the time and magnitude of a trend move.

January Crude Oil Prices

If anticipating the price of Crude Oil to come down to the 200-day moving average and the stochastics to come back down into the oversold condition, it can be projected that there might be a few more days of strength in the stock markets

The Crude Oil prices, when starting to back off from the $55 a barrel level, and projected to maybe support at the 50-day moving average, should have given us a price target and also an estimated length of time that equity markets should remain positive. A definite advantage of Candlestick signals is that they give us a clear indication of what investor sentiment is going to be when that level is hit. Doing a very simple analysis, it is clear that the potential Bullish Engulfing Pattern (that occurred in early November) at the 50-day moving average, was not confirmed the following day. That should immediately have provided the evaluation fodder to project that oil prices were not supporting at that moving average and would continue their downtrend.

Once it broke through the 50-day moving average, having the knowledge of what are typical trend movements, a new evaluation can be put in place. By mid-November, it became apparent that the trend in Crude Oil prices was coming back up. Now the question becomes what will of the price do when it hits the 50-day moving average again? One of two things will happen. In the first scenario, the 50-day moving average is breached, showing that it is not a resistance to the new move up. This would be indicating that prices may now head higher, at least testing the $55 a barrel recent high. The second scenario would be that the 50-day moving average is going to act as resistance. If that is the case, a new pattern can be projected.

Because Crude Oil prices have been an influence on the stock market's performance, knowing what it does at that level becomes highly important. A break back to the upside in Crude Oil prices would mean weakness coming back into the equity markets. At that point, strategies could be put in place, whether taking profits on the long positions or adding short positions.

As was seen, when prices came back up to the 50-day moving average, we start to see the definite Candlestick "sell" signals. This creates a completely different strategy. Knowing that a chart trading pattern called the "Blue Ice Failure" is occurring, named by Dave Elliott of www.WallStreetTeachers.com , where once a trend comes down through a moving average, then comes up to test it and fails, now has a new highly predictable result. The continued downtrend from that failure will first have a high probability of going through the recent low of the trend with an additional high probability that it will move down to the next major moving average, the 200-day moving average.

Understanding what this pattern projects, the Candlestick signals become my very important element for seeing what investor sentiment is doing at those important support and resistance levels.

Stock Market Direction - Both the Dow and the NASDAQ direction have been fairly easy to project using the Crude Oil analysis. When Crude Oil prices were falling from the $55 a barrel area, equity prices moved up. When Crude Oil prices appeared to be coming up to test the 50-day moving average, equity prices in both the Dow and the NASDAQ had an opportunity to sell off. The sell-off could have been a distinct pullback or a consolidation period. As can be seen in the Dow chart, a few weeks back revealed two Evening Star-type signals. Stochastics were starting to roll over in the overbought area. This provided some opportunity to start taking profits.

Note however, when Crude Oil prices were moving back up, the Dow went through a period of flat trading. This was evident with the indecisive trading days shown by the Candlestick signals. Being that we already knew that the markets were being influenced by the Crude Oil prices, we could make some reasonable assumptions. The stock market was well in the overbought area. Crude Oil prices were bouncing back up. The opportunity for the Dow to pull back hard was there, yet it only went through a consolidation stage. At the same time, we were analyzing that the Crude Oil prices appeared to be hitting resistance at its 50-day moving average.

At that point, the assumption could be made that if the Crude Oil prices failed to break through the 50-day moving average and at the Dow Jones wasn't selling off very dramatically when Crude Oil prices appear to be going up, as seen in the morning comments, it was recommended to hold the longs that were acting well and have a few short positions on, but be prepared for the next leg up in the stock markets if Crude Oil failed and started heading down to the next support level, the 200-day moving average. The breakdown of Crude Oil prices this past week added new strength to the stock market indexes, as expected.

Crude Oil prices should test the 200-day moving average, still a few dollars below where it is trading now. This means we should still expect some upward move in the indexes for a few more days at least. In the NASDAQ, although it formed a little Doji on Friday, the stochastics still appear to be heading upwards and nothing has indicated that any selling has come into the markets. This is another indication that we should be holding the long positions for a few more days.

The Strong Sectors - Nothing has changed a great deal over the past few weeks, the semiconductor and computer-related stocks are still in an uptrend. There has been some opportunity to take some profits in these stocks, wait for them to pull back to the 50-day moving average, and upon seeing some good strong "buy" signals again, reenter the positions. That is exactly what is occurring in the oil and gas drilling sectors right now.

Some sectors that are getting toppy are the regional banks, auto-parts, broadcasting radio and TV, and toys and games. It's good to analyze the strong sectors as well as the toppy sectors, in case something dramatically changes in our analysis of market direction.

The past four weeks has resulted in some 20% and 30% gains in a number of stock positions. Not from any great stock-picking ability, but having the Candlestick signals reveal which sectors/stocks were showing the best potential in this latest rally. The signals also indicated which stocks should be sold during the consolidation and which ones could be held. During that same time, there were short recommendations. However, the Candlestick signals also revealed that it was time to cover the shorts very quickly.

This is one of the major advantages of the signals. The professionals always tell you to let your profits run and cut your losses short. But they never tell you how to do it. The Candlestick signals tell you when they get in and when they get out. That provides a format for getting out of bad trades immediately. Being able to identify the major signals in Candlestick analysis greatly enhances your ability to add profits to your account by a being in, and staying in, good trades and cutting your loss on bad trades.

Candlestick Forum CD Training Special -The response for the Candlestick Forum CD training special has been much greater than what was expected. It is good to see the number of people that seriously want to learn Candlestick investing. Steve Bigalow says that hopefully this is a sign that investors now realize that understanding the Candlestick signals is not difficult and can provide some very common sense investment elements. Because of the large interest in the CD training package, the special discount offer is being extended until December 15, 2004. Each 45-minute training CD goes into depth about what makes each signal effective, the location of the occurrence in a trend that makes it so 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. This understanding will become very illuminating for your investment skills. Learn how to profit from the markets very quickly.

The 12 training CDs, bought individually, has a $509 value. However, if you purchase the full training package now before December 15, 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.

Learning how to use Candlestick signals could take years to master if you do not learn them correctly. The advantage you have today is being able to learn how to use the major signals and in an easy-to-understand process. The visual education that is provided in the training CDs will advance your investment knowledge by decades. Why learn from your mistakes? Learn exactly what you need to produce high profits in any trading market.

Take advantage of this valuable information special. You'll receive $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 produce 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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Holiday Special - The Candlestick Forum is an advocate for teaching investors, especially kids, how to recognize and utilize the major signals for high profit-trading. The advantages of using Candlesticks signals are obvious. They have worked effectively for centuries. This is not information that is going to be promoted by the so-called Wall Street professionals. The Candlestick signals are just common-sense investment practices put into a visual graphic. Introduce this unique philosophy of investing to your kids, nieces and nephews, investment buddies, and all of those investors that you know who would like to learn more about investing. Point their investment education in the right direction. Give a holiday gift that may alter somebody's investment perceptions and make them a successful investor for the rest of their life.

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Member Special - The new training CD "Gaps at the Top with Candlestick Signals" reveals how to identify convincing signals for taking profits and, more importantly, for shorting stock positions. This CD is being priced at $59.77. The holiday times are for giving. So here is the membership special. Mr. Bigalow is convinced that when you learn how to use the Candlestick signals correctly, you will gain tremendous advantages in learning how prices move. Those advantages should be passed on to your children, nieces, nephews, and anybody that should not have to go through a dependency of using the so-called Wall Street professionals to try to make good returns in the markets. Teach your kids this trading program so they don't have to make the same mistakes you did. So here's the member deal. Buy the "Gaps at the Top with Candlestick Signals" for the discounted price of $39.77 and we will also send two sets of flash cards ( already packaged in a nice gift box ) and two 2 foot by 3 foot posters of the "Major Signals" for FREE! The posters and the flash cards are not for you (wink, wink). They are to be given away during the holiday season to jump-start someone else's Candlestick education and to teach them to use the signals to invest for themselves.

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Good Trading,

- The Candlestick Forum Staff

www. candlestickforum.com