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Stock Investing With High Profit Candlestick Signals

Stock investing becomes greatly simplified when utilizing a proven trading strategy. Candlestick signals provide that format for successful stock investing. Whether analyzing the markets in general or specific trading entities, being able to evaluate visually what a trend is about to do becomes a highly profitable asset. Although Candlestick signals were developed trading commodities, they work extremely successfully when applied to stock investing.

Candlestick signals provide a leverage factor for stock investing. Being able to visually analyze the direction of the market indexes is the first major advantage. Next, specific sectors/industries can be analyzed. Evaluating that the markets may have produced a bottom reversal and starting an uptrend provides a format for searching for which sectors are producing strong bullish signals. To maximize profits when stock investing, the Candlestick signals identify which sectors may be leading the next market rally. Candlestick charts reveal these type of situations

Once those sectors have been identified, it becomes a simple stock investing process to do a search for the best bullish signals being formed in individual stocks in those sectors. This search process aligns all the probabilities of being in the strongest stock moves. The purpose of stock investing is to maximize profit with the minimal amount of risk.

The major signals become a valuable source for identifying potential market reversals.

While other technical investors analyze parameters that “could” possibly be representing a reversal, the Candlestick investor has that visual information much more clearly available. The Candlestick signals become an important analytical tool for successful stock investing.

Market Direction - As would be expected, after a steady market rally for the past month, especially in the NASDAQ, some profit-taking should be anticipated. Up until the last few days, being able to analyze that there was no severe sell signals forming in the NASDAQ, while the Dow was showing some toppy signals, would have been evaluated that the mass selling sentiment had not come into the markets, the uptrend was persisting.

It can be assumed that the markets are not selling off if one index is still moving positive when the other index appears to be running out of steam. Logic dictates the downtrend will not start until selling, via Candlestick sell signals, is witnessed in both the Dow and the NASDAQ at the same time.

Friday's sell-off produced a bearish candle in the NASDAQ but not a Candlestick “sell” signal. The Dow formed an Evening Star signal on Friday. This is the second evening star signal formed in the Dow over the past six trading days. What should this indicate? That the buyers are starting to run into selling pressure. If one Candlestick signal pattern represents a potential reversal, then two signals provide that much more credibility.

DOW

NASDAQ

How should this scenario be evaluated, the NASDAQ forming a bearish candle but not a signal? At the same time, the Dow displayed a Candlestick sell signal. A simple evaluation would be that a pullback is about ready to occur. The Dow chart provides some easy targets, the moving averages. It would be conceivable for the Dow to pull back to the 50 day moving average, the dark blue line.

The NASDAQ could also pull back to a moving average. The first target should be the 20 day moving average. The 200 day and then the 50 day moving averages are potential targets after that. However, it should be anticipated that these markets are in a profit-taking pullback versus a full-fledged reversal. Why that anticipation? First, the Dow appears to have some support levels not too far below the current trading. Second, the NASDAQ has not done a Candlestick sell signal, just a bearish candle.

In either case, the markets have a high probability of a pullback. Where will that pullback go? The moving averages are likely targets. But since the probability is extremely high that there will be a pullback, prudent stock investing should dictate taking some profits, maybe adding some short positions, and watching for ?buy? signals at the support levels.

A short-term pullback is anticipated but there is no guarantee of how far the pullback may go. Take profits in charts that are showing sell signals. Whether the market pulls back for three days or three weeks, positions can be put back down then.

EVENING STAR
(Sankawa Yoi No Myojyo)
Description

Description

The Evening Star pattern is a top reversal signal. It is exactly opposite the Morning Star signal. Like the planet Venice , the evening star, it foretells that darkness is about to set or that prices are going to go lower. It is formed after an obvious uptrend. It is made by a long white body occurring at the end of an up-trend., usually when the confidence has finally built up. The following day gaps up, yet the trading range remains small for the day. Again, this is the star of the formation. The third day is a black candle day and represents the fact that the bears have now seized control. That candle should consist of a closing that is at least halfway down the white candle of two days prior. The optimal Evening Star signal would have a gap before and after the star day.

Criteria

  • The uptrend has been apparent.
  • The body of the first candle is white, continuing the current trend. The second candle is an indecision formation.
  • The third day shows evidence that the bears have stepped in. That candle should close at least halfway down the white candle


Signal Enhancements


The longer the white candle and the black candle, the more forceful the reversal.The more indecision that the star day illustrates, the better probabilities that a reversal will occur.

A gap between the first day and the second day adds to the probability that a reversal is occurring.

A gap before and after the star day is even more desirable. The magnitude, that the third day comes down into the white candle of the first day, indicates the strength of the reversal.


Pattern Psychology

A strong uptrend has been in effect. The buyers can't imagine anything going wrong, they are piling in. However, it has now reached the prices where sellers start taking profits or think the price is fairly valued. The next day all the buying is being met with the selling, causing for a small trading range. The bulls get concerned and the bears start taking over. The third day is a large sell-off day. If there is big volume during these days, it shows that the ownership has dramatically changed hands. The change of direction is immediately seen in the color of the bodies.

 

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