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February 21st Market Wrap-Up

There is a simple technique to analyze whether the markets have had a reversal or merely profit-taking. Today the indexes traded lower. However, the transportation index continue to trade higher. This reveals there was no consensus in the selling today, merely profit-taking in specific areas. Also, the nature of the signals reveal the magnitude or conviction of the selling. Although the Dow was down 100 points, still closed above the T-line. Both the Dow and the NASDAQ, trading lower, did so with indecisive candlestick formations, providing visual information that the strength of the selling was indecisive. A true reversal in the overall market trend would require a candlestick sell signal and a close below the T-line. With this knowledge, an investor keep from getting whipsawed out of positions too early.

Candlestick signals pinpoint where the strength or weakness may be coming into a price. DLPH demonstrated a strong upside potential with a trend kicker signal. The strength of the signal also confirms a J-hook pattern, producing strong probabilities of more upside. DPZ had a dramatic drop in price based upon earnings today. Fortunately, with candlestick analysis, this would not have been a surprise. The sell signals in the close below the T-line work clearly evident over the past couple of weeks of trading. Candlestick signals are the graphic illustration of whether the Bulls or the Bears are in control of a price move.


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Good Investing,

The Candlestick Forum Team


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