May 7th Market Direction
Strong bullish sentiment was illustrated today in the NASDAQ. It gapped up through the resistance level after the huge bullish engulfing signal of Friday. It demonstrated the resistance level of the wedge formation was not acting as resistance. However, the Dow and the S&P 500 traded positive but formed Doji type days after failing to get through the 50 day moving average. Although the NASDAQ is showing a good bullish signal, the Dow and S&P 500 still have to breach the top of the wedge formation, indicating the sideways mode of the market is still not in progress. This evaluation is made much more easily knowing what each candlestick signal illustrates. Today's Doji in the Dow and the S&P 500 demonstrate indecision after failing at the 50 day moving average. The portfolio strategy now becomes more oriented toward the bullish side but still with some caution until the Dow can breach the upper resistance level.
Simple chart evaluations allow investors to identify when to take profits. The oil stocks have been working well over the past few weeks. Candlestick charts reveal where most people buy, they by exuberantly at the top. As illustrated in the CRZO chart, the warning to take profits was based upon the early gap up today followed by big trading in the overbought condition.
Candlestick charts provide the alerts for when investor sentiment is gotten to frothy. Very simple analysis allows the candlestick investor to recognize exuberant buying in the overbought condition. Note the distance from today's trading and the T line. That distance would have alerted the candlestick investor to flip to the 10 minute chart to show when to take profits. Candlestick charts are merely the graphic depiction of investor sentiment. Investor sentiment works the same way time after time. This provides easy to identify signals to indicate when it is time to take profits.
We will conduct a "Members Only" chat session tonight at 8:00 pm EST.
The Candlestick Forum Team
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