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March 19th Market Direction

The market indexes had been supporting on observable patterns up until today. The Dow had been compressing in a wedge formation. The NASDAQ had remained above the T line. Today's lower trading breached the bottom of the wedge formation and the NASDAQ gapped down below the T line. The candlestick charts provide a visual advantage in that it demonstrates when a pattern is in progress as well as when a pattern has been breached. Being able to visualize the magnitude of a breach creates new price patterns that a candlestick investor can quickly assess. Because investor sentiment creates reoccurring price patterns, the candlestick investor has a huge advantage for analyzing which direction the markets and/or an individual stock price is likely to move. Today's weakness dramatically diminished the upward trend of the markets, providing higher probabilities of more down trend trading.

The overall direction the market can be offset by participating in price patterns. The frypan bottom pattern is extremely powerful set up. It is based upon the accumulation of bullish sentiment over a longer period of time, not being affected by the direction of the overall market. This produces two major benefits for the candlestick investor. First, when there is an overall market direction change, the change in direction for a frypan bottom may take two or three more days, giving investors time to get out of a trade profitably or at least flat. Secondly, if there is no adverse change of market direction, the profitability of being in a frypan bottom pattern breakout is huge compared to merely uptrending stock prices. Being able to identify what reoccurs in human nature allows candlestick investors to consistently put the probabilities in their favor.

 

 

We will conduct a "Members Only" chat session tonight at 8:00 pm EST.

Good Investing,

The Candlestick Forum Team

 


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