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Technical Stock Trading - Enhanced by Candlestick Signals

Technical stock trading has become dramatically refined over the past 10 years. The capabilities produced by computer generated graphics and live information feeds have produced a valuable trading tool. This trading tool was not available to the average investor just over a decade ago.

Technical stock trading can now be analyzed by the online trader with an extremely good availability of quality services. This capability has not only allowed investors to utilize the same tools that were available only to the professionals years back, but it has exploded the number of trading systems being utilized. With millions of investors able to perform their own research and testing, technical stock trading methods have been dramatically refined. One of the major benefits for technical stock trading has been the application of Candlestick signals to many new tested techniques. The multitude of investment parameters that now can be tested and found to have statistical credibility can further be enhanced when applying the Candlestick signals.  Candlestick charts make the analysis much easier.

Understanding the psychology that creates the Candlestick signals produces a huge mental advantage for investors. Techniques, such as the moving averages, that were a tedious indicator to calculate prior to computers, now can be dramatically improved for projecting reversals. The moving averages provide important information for the technical trader. Some technical stock trading methods watch for the moving averages to cross. This becomes an important buy or sell indicator. Other technical investors use the moving averages for support and resistance levels.

Using the moving averages as support and resistance levels becomes more accurate when seeing what the Candlestick signals are revealing at those important levels. Candlestick signals and Candlestick formations provide a tremendous amount of information at those critical levels. A technical stock trading technique, when using Candlestick signals, is to look for a Candlestick buy signal when a trend is oversold, when the stochastics are below 20. This technique provides a framework for a high probability profitable trade.

However, a Candlestick buy signal, when the stochastics are oversold, occurring right on a major moving average, puts the favorable probabilities that much greater in the favor of an investor. Technical stock trading involves recognizing the indicators that produce a high probability of certain events occurring. Utilizing high probability indicators in conjunction with each other increases the probabilities of being in a correct trade. Having the ability to see what is actually happening at important technical levels produces the ability to better analyze a reversal situation as well as taking advantage of it prior to the rest of the investors who are waiting for confirmation.

The Candlestick signals produce information immediately at those levels. Recognizing and understanding the twelve major signals in Candlestick analysis provides the insight to be able to analyze, with a high degree of accuracy, where and when a trend reversal will occur. This analysis is a very simple visual process. Learn the major signals and learn how to use them at the major moving averages. This knowledge will provide you with the capability of being in the correct direction of a trend an extremely high percentage of the time. That is the basis for technical stock trading in a nutshell, being able to analyze indicators that put the probabilities in your favor. The Candlestick signals are the cornerstone for successful trading. They can be applied to any other trading technique and greatly enhance the results.

The chart graphic illustrates that the 50-day moving average could be the pullback target. Important criteria in that observation is the words "could be". That is the potential support level but nothing is set in stone. Why continue to own a position where the probabilities indicate that it is going to go back down? Take profits and be ready to buy it back if the 50-day moving average becomes the support.

As illustrated in the chart, the 50-day moving average acted as support, the evidence being that the Hammer-type signal and a couple Doji's. The bullish trading off of the 50-day moving average after those indecisive days reveals that the buyers were stepping in. Buying back in at that level creates a low risk trade. A move back down through the 50-day moving average becomes the stop. The upside potential becomes a breach of the $14 area, then the $17 area. The gap-up through the first resistance level, with stochastics starting to turn back up, provides a graphic picture that the buyers are starting to come into the stock with force.

 

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