August 23rd Market Wrap-Up
Simple rules following candlestick signals make analyzing a trend and/or a breakout situation much easier to exploit. The probabilities of how prices move after specific candlestick signals allows an investor to be in the appropriate trade at the exact appropriate time. The profit-taking could be seen in the indexes based upon very simple analysis. Candlestick sell signals which were being confirmed at obvious resistance levels allows the candlestick investor to make trade decisions immediately. The Dow formed a shooting star signal in the overbought condition right at an observable resistance level. The same was observed in the S&P 500. Today the NASDAQ formed an indecisive Doji day after failing to breakout through a resistance level. This information can immediately be acted upon based upon how the markets open tomorrow. These simple observations allow the candlestick investor to much more accurately analyze when a trend is reversing.
The Doji is a very informative candlestick reversal signal. There is a very simple Doji rule. Prices will usually move in the direction of how they open after a Doji. Logic says that if you see a Doji that has come up to a resistance level, the next days strategy is very easy to implement. If it opens positive, it immediately indicates the resistance level is not going to act as resistance. Conversely, if it opens lower after the Doji, it clearly reveals the resistance level has acted as resistance. Candlestick analysis is merely learning what human nature usually does after the signals and patterns are formed. Prices do not move based upon fundamentals! Prices move based upon the perception of fundamentals. Candlestick signals are merely the graphic depiction of what is occurring in investor sentiment.
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The Candlestick Forum Team
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