January 30th Market Direction
A market reversal or merely profit-taking? The candlestick investor has the advantage of identifying the magnitude/force of buying or selling pressure. Although the markets traded lower today, there were a couple pieces of evidence that today's selling was more likely just profit-taking. The T-line is an important indicator for confirming when a trend has reversed. Very simply stated, an uptrend will have reversed upon witnessing a candlestick sell signal and a close below the T line. Both the Dow and the NASDAQ pulled back in decisively, forming a hammer type signal, and closed at or slightly above the T-line. This makes analyzing the trend very easy. After today's indecisive trading, the market will likely move in the direction of how the markets opened tomorrow. Obviously a positive open will continue the uptrend while a lower open will indicate the Bears have taken control.
Another major advantage when analyzing candlestick charts is knowing what should occur coming out of candlestick patterns. The frypan bottom is one of the major candlestick patterns. It not only provides a high probability of projecting the direction of a price move, but it also indicates when a very strong price move is about to occur. Additionally, as illustrated in the GPRO chart today, the pattern has a high likelihood of continuing the pattern trajectory in spite of the overall market conditions. This creates much greater opportunities for being in profitable trades without having to worry what the overall market conditions are doing on a day to day basis.
We will conduct a "Members Only" chat session tonight at 8:00 p.m EST.
The Candlestick Forum Team
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