Predicting Stock Price

Successful day trading as well as successful long term investing depend upon predicting stock price. If predicting stock price sounds like predicting the future it is. Predicting stock price is also reading history! Rice traders in the Japan of the samurai learned that market prices, or more accurately, market price patterns repeat themselves. Market trends come and go and the patterns they contain can be used to predict stock price. Traders using Candlestick patterns as their guide are letting the market tell them what the market will do next. Predicting stock price through Candlestick analysis requires learning Candlestick charting techniques. Traders profit by executing trades when current stock prices fall into a Candlestick pattern. Whether the Candlestick signal predicts a market trend, a market reversal, or a coming market rally, the use of Candlestick trading tactics can turn predicting stock price into counting stock profits.

We all wish we had a crystal ball to tell us the future. The fact is that the future often repeats the past. In this regard it is wise to remember what the author George Santayana said, Those who cannot remember the past are condemned to repeat it. This is, unfortunately the case for many traders. Trying to predict stock price without the benefit of technical analysis tools like Candlestick pattern formations can be risky business. It amounts to forgetting, or ignoring, what the past has taught us. However, traders who use Candlestick chart analysis are essentially using historic price patterns in predicting stock price. It is because the stock market and other markets repeat themselves in predictable patterns that the trader can read the first part of a stock price pattern in order to anticipate the second. By executing well timed trades it is possible to profit from predicting stock price in this way.

Long term stock price prediction is best done with fundamental analysis. A long term investor will look for intrinsic stock value as manifested by expected forward looking earnings. In addition, a margin of safety such as a low debt to asset ratio can be an incentive to add a stock to an investment portfolio. Nevertheless, in buying stocks or selling stocks the investor will want to obtain the best current stock prices. This is accomplished with the use of both fundamental and technical analysis of stocks. While the fundamentals of a company will give us a view of the longer term future it is the day to day and, sometimes, minute to minute market consensus that sets the exact stock price. Using Candlestick signals the trader can commonly succeed in predicting stock price changes and more profitably buy and sell stock.

For the short term trader or long term investor interested in predicting stock price the use of Candlestick signals can be learned at an online Candlestick Forum Boot Camp. Online training webinars will help the beginning investor and trader learn both the basics and the details of successful buying and selling of stocks using Candlestick basics. Learn about Candlesticks and let the past help you predict the future in the stock market.

Market Direction

Candlestick analysis provides tools that not only projects price direction with a high degree of accuracy, but it can also predict a target price within a reasonable price range. Why is this an advantage? Obviously, it allows the investors to make a decision of whether that price move is worthwhile. There will be many chart patterns that are excellent, but the price may have very limited movement before running into a projected resistance level. Obviously, it is much better to find a price move that will move up 30% versus 3%.

This slow steady uptrend of the past few months have allowed many candlestick patterns to perform as expected. One of the expected features is a very strong price move. A Jay hook pattern allows for the evaluation of wave three with a high degree of accuracy. Wave three will usually be equivalent to wave one. Why is this important? If wave one was only a 6% move, then wave three will probably be a 6% move. However, if wave one was a 15% move, they can now be projected that investing into wave three has a high probability of producing a 15% return.

Taking that concept one step further, a price move coming out of a Jay hook pattern can be projected to have a specific price area target. This now becomes a perfect set up for placing an options call spread. Most investors, when they see a potential price move, want to buy the calls. This is often not the best strategy. Buying one set of calls and selling a higher set of calls produces a couple large advantages. First, it reduces the amount of money exposed to the call trade. If the market makes a sudden turn to the downside, the losses will be smaller. If the price does move to the expected target, the percent return will be dramatically higher than merely buying calls outright.
There is a disadvantage to buying a spread. If the price, for some reason, moves well beyond the projected target, the potential of making huge profits is eliminated. But the probabilities become dramatically better by setting up an options strategy that would take advantage of the high probability price move versus the unexpected large price move.

Investor sentiment can be analyzed graphically because of the reoccurring nature of the human psyche. Whether training stocks, options, or commodities, candlestick analysis provides a much more clear visual opportunity for making large profits. This is the result of candlestick signals and patterns performing the same way over and over for centuries.

Predicting Stock Price, Feed Cattle Example

Feeder Cattle March

As illustrated in the March feeder cattle, the downtrending channel has been breached. The bottom of the pullback demonstrated indecisive trading, hammer signals. A breach of the 50 day moving average and the declining trend channel makes the prospect of a wave three pattern extremely high. Once an investor has learned which price patterns work effectively, they can now control their own investment results.

Chat session tonight at 8 PM ET for members.

Good Investing,
The Candlestick Forum Team

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