September 6 Market Direction
A Doji, or any other candlestick reversal signal, followed by a gap up is a very powerful indication that investor sentiment has not only reversed, but the new trend should have reasonably good strength. This was witnessed in both the Dow and the NASDAQ in Friday's trading. A Doji, followed by a gap up, is known as the best friend signal. The best friend signal has two relevant factors. First, it demonstrates that a reversal has occurred. Secondly, the reversal, because of the gap up, will usually have a very strong new trend. This makes the prospects of the markets moving higher that much more likely. Especially when a strong reversal signal occurs off a major technical level, such as the 50 day moving average, it makes the new trend more relevant.
This occurred in the Dow on Friday. Although the overall trend does not have massive bullish evidence, the uptrend makes individual stocks/sectors continue to work based upon their strong candlestick signals and patterns.
When the overall market uptrend has been relatively slow and steady, candlestick investors can take advantage of price patterns that are going to produce high profit returns. This allows investors to take advantage of the strongest price moves during an uptrend, as well as the strongest down moves when the market may be moving modestly lower. Because investor sentiment reveals where the strong price moves will occur, based upon reoccurring candlestick signals and patterns, investors not only have an opportunity to identify which price moves will have the most potential, but they also have the advantage of seeing
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The Candlestick Forum Team
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