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December 17th Market Direction

Was the market selloff predictable? When utilizing the common sense built into candlestick analysis, yes it was easy to see the downtrend confirmations. Technical analysis is merely the identification of where support and resistance levels may occur. The use of candlestick analysis makes analyzing what is occurring at observe technical levels much more clear. As illustrated over the past two months, the Dow could not get up through the 50 day moving average. This was more evident when witnessing obvious candlestick sell signals at that level. Where most technical analysis may have suspected of failure at the 50 day moving average, candlestick reversal signals made it immediately obvious. The same analysis can be applied to the bottom/support level of a sideways trend channel. The past week of trading provided the prospects of a sideways trend channel support level continuing to act as support. The candlestick investor had much more definitive analytical tools to decipher whether the support level was going to maintain. The T line is a very important factor. A simple analytical evaluation can be utilized with the T line. As long as there is not a candlestick bullish reversal signal and a close above the T line, the probabilities are heavily oriented toward the downtrend remaining in progress. A strong candlestick sell signal on Friday took trading down through the support level, continuing the downtrend. Today's bearish trading is merely the confirming results of how human nature reacts. A wave three to the downside is in progress.

Profitable candlestick trades is merely taking the high probability results expected from the candlestick signals to put trading funds in the appropriate set ups. This is mere common sense. If an individual stock chart reveals a strong candlestick sell signal and the premarket futures indicate the downward direction of the overall market is still in progress, putting on a short trade is merely a high probability profit trade set up. This could be seen with a bearish best friend signal occurring in SHOP or bearish signals occurring at a major resistance level as viewed in W. because human nature works the same way time after time, candlestick analysis provides the probability evaluation that consistently puts investors in the right trades at the right time.

 

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

Good Investing,

The Candlestick Forum Team


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