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December 14th Market Wrap-Up

The T-line remains a vital trend analytical tool. Although the NASDAQ and the transportation index has formed a bearish engulfing signals today, both have use the T line as a support area. The Dow, although trading slightly lower, has not produced any reversal candlestick signal. The benefit of the graphics in candlestick charts provides an immense amount of investor information. There has not been a major change of the trend. But the color of the candles give a better perspective of whether the Bulls or the Bears are in control. Today's dark candles, although not very decisive selling signals, reveals the nature of investor sentiment. It is starting to show some weakness in the trend. This does not mean the trend is over, it merely provides a better visual analysis as to when taking profits on profitable trades may be appropriate.

When the market gets a little bit soft, the credibility of trading candlestick patterns becomes more relevant. A candlestick pattern is usually created by a longer stretch of investor sentiment. If the market in general starts to turn, the investor sentiment that has build up in a candlestick pattern will usually take longer to dissipate. This makes trading in candlestick frypan bottom or J-hook patterns more profitable. They do not back off as quickly when the market starts backing off and they produce much bigger percentage profits when the market is heading in the appropriate direction. The expectation coming out of a frypan bottom or a J-hook pattern breakout is huge price moves, much more profitable than merely uptrending stock prices during an uptrending market.

 

 

Chat session tonight at 8 PM ET with Stephen Bigalow & Jeff Gibby. Click here to register.

Good Investing,

The Candlestick Forum Team


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