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December 6th Market Wrap-Up

Candlestick signals are very revealing. This is illustrated in the Dow. Monday, a Doji formed in the Dow right at a downtrending resistance level. The Doji rule illustrated, the next day after opening lower, that the resistance level was going to continue to act as resistance. Did this mean an 800 point drop in the market was going to occur? Definitely not, but it had the positioning of the portfolio oriented toward the correct direction. Today's trading took the markets from the top of the trend channel from Monday down to the bottom of the trend channel at the lows today. The hammer signals created in the Dow and S&P 500 today provided a strong indication that the bottom of the trend channel was going to act as support. The hammer signal now creates a viable trend analytical prospect. A positive open after a hammer signal implies more upside, indicating the trend channel is being maintained. This analysis allows the candlestick investor to have the appropriate long or short positioning in the portfolio.

An added benefit to witnessing candlestick patterns allows for the continuation of profitability based upon a pattern in spite of a hard selling market. This is due to the mere fact that patterns are the accumulative buying and selling of investors, with the realization of which direction the overall market is moving. Numerous candlestick patterns work profitably over the past two days even though the market sold off over 1500 points. Having the ability to analyze high probability/high profit pattern set ups produces inordinately strong profits as well as protects from downside reversals.

 

 

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Good Investing,

The Candlestick Forum Team


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