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January 31st Market Wrap-Up

The early selling in the Dow may have been worrisome but for the quick visual analysis that can be done on a candlestick chart, revealing what the other indexes were doing. The NASDAQ opened positive immediately started trading positive. The S&P hovered flat and then started trading positive. Visually identifying the buying in these two indexes would of created less concern for the selling in the Dow. Very simple analytical factor. The trend will usually move in the same direction that it is currently moving if one or two indexes are trading up while the other one or two indexes may be trading down. This reveals there is no major change of investor sentiment. As witnessed on the Dow chart, after coming up to the 200 day moving average, it covered at that level today, creating a Doji. This makes identifying what the markets would do tomorrow much more easy. The simple Doji rule tells us the markets will usually move in the direction of how they open after a Doji. Simple logic says if it opens positive tomorrow, the Doji rule tells us the 200 day moving average is not going to act as resistance. A lower open would imply profit-taking at the 200, making the analysis of each individual stock chart more crucial as far as witnessing any potential reversal signals. Because human nature works the same way time after time, simple candlestick rules allows a candlestick investor to get in or out of positions based upon what is expected after a candlestick signal or pattern.


A pattern breakout was illustrated in our recommendation for buying TPH. Note the strength of the reversal signal and where it closed yesterday. Knowing what should occur after a strong signal and a close on a resistance level allows the candlestick investor to enter a trade immediately without having to wait for further confirmation like many other technical trading strategies. A kicker signal in AMD showed exactly where prices could be bought today. A left right combo/frypan bottom breakout with a strong indicator that there was going to be much more upside. This is not rocket science! Human nature works the same way time after time allowing for identifying the exact times to be getting in or out of a trade at the appropriate time. Doing this on a consistent basis puts the candlestick investor and high probability/high profit trades inordinately high percentage of the time.



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Good Investing,

The Candlestick Forum Team


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