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May 3rd Market Wrap-Up

Candlestick signals allow investors to see much more clearly what is occurring in patterns. This is illustrated in both the Dow and the S&P 500 today. Early trading took both indexes down below the 200 day moving average, which would also have breached the bottom of the wedge formation that has been forming over the past few months. Today the Dow formed a hammer type signal, bringing the trading backup above the 200 day moving average and back into the wedge formation. The S&P 500 formed a Doji with the close near the top end of the trading range. This also brought trading back up into the wedge formation. The candlestick investor has the advantage of knowing what should occur after these type of signals. Positive trading tomorrow would be additional confirmation the wedge formation was still in process. Additionally, a lower open would put more doubt into the wedge formation remaining intact.

Because each candlestick signal makes analyzing price movements much more accurate based upon how prices open after a reversal signal, it allows investors to move rapidly as far as placing the appropriate trades. Candlestick price patterns are developed because of the reoccurring reactions of human nature. The J-hook pattern has been working very effectively. The J-hook pattern is very easy to identify as well as projecting where the next price move should go. Because human nature works the same way time after time, portfolio positions can be established where the probabilities are dramatically in the investor's favor. This is due to the expected results that will occur when identifying candlestick price patterns.




Good Investing,

The Candlestick Forum Team


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