Whipsaw markets, what candlestick signals tell
Candlestick signals produce one huge benefit. They illustrate the direction of investor sentiment. Not to state the obvious but there are markets that can be identified as going up. There are markets that can be identified as going down. There are also market conditions that do not provide any market direction. For the past 90 days, the direction of the markets in general has been very indecisive. For the long-term investor, it becomes very frustrating not to be able to project the direction of the markets. For the swing trader, this becomes more frustrating. The swing trader can usually be able to analyze which direction the market should move at least for the next two to four trading days. But that has not been able to be done over the past 90 days.
The Dow provided a relatively stable trading trend from January to the early part of May this year. Mid-May to mid-July has produced a choppy sideways trading market. This is not an unusual occurrence for the summertime. Normally, volume lightens up and with the lack of volume; outside market influences can swing the prices almost on a day-to-day basis. These conditions of course make producing consistent profits much more difficult. So how do candlestick signals help investors in these markets? The candlestick signals illustrate more clearly that there is a lack of direction. When the markets show a propensity of moving up one day and down the next day, and do so with relative consistency, that should inform the candlestick investor exactly what the market direction is doing. In this case, it is doing nothing. When market conditions are not appropriate for utilizing the information incorporated in the candlestick signals, take a break. There are some market conditions that make it very difficult to make money. If those market conditions can be observed in the recent past and there is no definite direction identified for the future, stay out of the market. The purpose of using candlestick signals is to put the probabilities in your favor. When it can be analyzed that there is nothing that is creating those probabilities, go fishing. Currently, the markets do not reveal any solid trading direction. That is the time to take a vacation.