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February 12th Market Direction

Friday's trading demonstrated Doji/Harami's in the major indexes. The S&P 500 hit a low right on the 200 day moving average. Today's positive trading confirmed the major reversal signal that formed in each index on Friday. The positive trading of today made the T-line a likely target. Continued bullish trading, taking the indexes backup above the T-line, would be further confirmation that a bottom has occurred. Further bullish confirmation was the fact that every "expert" on the financial news stations indicated on Thursday and Friday were projecting a much bigger pullback in store for the markets. Candlestick analysis is made simple by utilizing the combination of candlestick reversal signals and a close above or below the T-line.

Numerous stocks were providing the potential of reversal signals over the past few trading days. Most reversals do not occur at one reversal signal. Usually there is evidence of a bullish reversal when witnessing one, two, or three bullish signals occurring in the oversold condition. Our option trade recommendation today in AAPL was based upon a bullish engulfing signal in the oversold condition last week. However, it did not confirm by trading backup above the T-line. Today, AAPL gapped higher after a Doji/Harami signal that formed on Friday. Aggressive buyers could be establishing a new bullish position with a simple criteria at the end of the day, it needed to close above the T-line. Having the ability to analyze which direction the overall market may be moving and identifying strong bullish signals in individual stock prices put all the stars in alignment. This type of analysis allows investors to take advantage of reversal trends much earlier than other trading techniques.



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Good Investing,


The Candlestick Forum Team

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