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Stock Market Analysis - A Candlestick Signal Forte

Stock market analysis is accomplished by many methods in the investment arena. Technical analysis provides a better format for analyzing overbought and oversold conditions in the market, much better than trying to do a fundamental analysis of the markets. The Japanese traders say "let the market tell you what the market is going to do." The utilization of Candlestick signals makes stock market analysis and price trend evaluation relatively easy. It becomes difficult, at times, to sort out what the stock market indexes intentions are when listening to the many scenarios from the so-called “market experts.” Watching the financial news stations will always provide a multitude of opinions on where the market is going. Using Japanese Candlestick signals will circumvent all that noise.

Being able to do a relatively accurate stock market analysis provides the Candlestick investor with a huge advantage when positioning a portfolio. Candlestick analysis allows investors to project trend reversals of the stock market indexes with a relatively high degree of accuracy. One misconception about Candlestick signals is that there are too many of them to learn. Of the 50 or 60 Candlestick signals, there are only about 12 signals that will occur a vast majority of the time: the Doji, the Bullish and Bearish Engulfing signal, the Hanging Man, the Shooting Star, the Hammer, the Inverted Hammer, the Bullish and Bearish Harami, the Dark Cloud, the Piercing Pattern, and the Kicker signal. Knowing these signals alone will dramatically improve your analysis of trend reversals and make learning Candlestick analysis much easier. Having this analysis capability in their mental arsenal allows the Candlestick investor to position their portfolio in the correct direction when a move occurs. Understanding the psychology of how the signals are formed provides investors with better insight into the proper placement of positions.

In the process of writing the second book, oriented towards utilizing Candlestick signals in high profit patterns, Mr. Bigalow will be providing much more material in the member’s area of the Candlestick Forum site. This information will be illustrating how high profit patterns can be utilized effectively for stock market analysis. In the foreseeable future, members should be aware that new information will be available more in the e-book format versus the training CDs until the next Candlestick book is fully written. This information should be highly informative for those trying to learn Candlestick investing. Additionally, any questions about high profit signals will be welcomed and appreciated, for the purpose of making the information going into the book as clear and understandable as possible.

High Profit Patterns - One chapter of the book will be dedicated to the analysis of gaps. Most professional investment advisers suggest that investors stay away from gaps. Supposedly, the risk of trying to invest after a gap-up or gap-down is too risky for the average investor. Gaps, in conjunction with Candlestick signals, are actually an investor's best friend. Understanding the investor sentiment that was involved to create a Candlestick signal and gap situation provides the biggest profit potential.

If you understand what forms a gap, then you can take that knowledge and use it to your advantage. If you dissect the definition of a gap, then you can understand why you want to use it for your own investment purposes. A gap is formed when the trading of one time period does not overlap any of the trading of the previous time period. In the case of a gap at the bottom, starting an uptrend after a Candlestick signal, the gap illustrates that investors want to get into that trading entity (stock) with such enthusiasm that they are willing to move the price up above any price level of the previous day.

In Candlestick analysis, that is exactly the price trend that an investor wants to be in, a trend that is starting with very strong buying enthusiasm. As can be seen in our recent recommendation of EXTR, a gap-up open following a Doji, right on the 200-day moving average, when the stochastics were in the oversold area about to turn up, makes for a very compelling ?buy? recommendation. The gap-up on the open clearly illustrates that investors wanted to get into this position as quickly as possible.

 

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