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February 23rd Market Wrap-Up

The transportation index has sold off hard today, putting it back into a slow uptrending trading channel. The NASDAQ and the S&P 500 are forming hanging man signals while the Dow is forming a Doji today. Although the uptrend continues, today's potential reversal signals warrant watching to see what the premarket futures are demonstrating tomorrow. A lower open would confirm today's potential reversal signals. This would not necessarily indicate a full-scale reversal but would imply profit-taking in the indexes, heading back towards the T-line support. Because we can recognize potential candlestick reversal signals occurring in the appropriate areas of a trend, the candlestick investor can be much more alert/prepared to take profits and or change the composition of a portfolio. Adding a short position or two when closing out long positions can be done to take advantage of a potential reversal of the overall market. This does not necessarily mean that the markets are turning over for a strong downtrend, it might illustrate a profit-taking pullback. Adding a few short positions during the pullback and then add to the profitability of the portfolio even though the pullback may only last two or three days. However, if the pullback comes back down to the T-line, the trend can be reassessed based upon what type of candlestick signals occur at the T-line area.

The scoop pattern is one of the predominant candlestick patterns. Recognizing the handle and the scoop allows investors to take advantage of expected price moves that come out of that pattern. Our recommendation on UCTT was based upon a scoop pattern set up. The analysis of what should happen when prices come out of a pattern makes analyzing what is occurring in the trend much easier to evaluate.UCTT produced a gap up Doji today after confirming the scoop pattern. The Doji rule will help analyze whether the uptrend will remain in progress based upon how the price opens tomorrow. Knowing what should occur based upon a signal or a pattern allows the candlestick investor to analyze what the trend is doing in a particular trading entity with much more accuracy.

 

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Good Investing,

The Candlestick Forum Team


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