Market Overview

DOW Reversal Predicted by the Evening Star Signal

Candlestick signals make observing the obvious that much easier.

The Dow has been in a downtrend since the Evening Star reversal signal revealed itself. Where some technical methods may have implied a market top on May 1, the candlestick Evening Star signal made it apparent to candlestick investors immediately.

More exacting, part of the Evening Star signal was developed with a Hanging man signal. The reversal of the trend could easily be evaluated based upon the premarket futures the next day after the Hanging man signal.

It is this type of simple analysis that allows candlestick investors to gain a huge advantage in closing out long positions and/or establishing short positions.

Most trading programs produced indications of what 'might' be occurring at specific levels. Candlestick signals reveal a much more powerful element. They indicate what is actually happening to investor sentiment at important technical levels.

The Dow topped out in early May where many trading techniques would've had a strong suggestion there could be resistance at that level, at the same level as previous highs. The evening star signal demonstrated immediately to candlestick investors that a strong sell signal had occurred at the resistance level. It did not take two or three more days to the downside confirm the top was in.

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The Candlestick Forum utilizes another very important technical tool to confirm a trend change. The eight exponential moving average, ( the T line) is a high probability trend indicator. Simply stated, a candlestick buy signal in the oversold conditions AND a close above the T line creates an extremely strong probability an uptrend is in progress.

The uptrend will remain in progress until a candlestick sell signal and a close below the T line occurs. As was illustrated in the first week of May, an Evening star signal was followed by continued selling, brought the Dow down through the T line. This produced a compelling target of 12,700 for the Dow, a trend line support level.

The visual aspects of candlestick analysis allows for very accessible trend analysis. This helps candlestick investors to be positioned in the correct direction at the appropriate time.

However, the powerful elements built into candlestick signals and patterns allows for huge potential gains in spite of of the direction/condition of the market indexes in general. The past few days have seen very strong gains coming from the J hook pattern. Tuesday's recommendation, Feihe International (NYSE: ADY), was based upon the J hook pattern. It produced a 48% profit from Monday to the end of Tuesday based upon the potential J hook pattern breakout.

ADY:

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Does every candlestick pattern produce these gains? Definitely not! But the information built into candlestick signals and patterns allows an investor to potentially participate in high profit trades in an inordinately high percentage of the time. These patterns produce definite results. They are the reoccurring results of typical investor sentiment.

The Japanese Rice traders not only clearly identified the signals that illustrated there was a change of investor sentiment, they also interpreted the investor perceptions that created the signals. This combination allows for trend analysis that would be found in the most experienced traders.

Candlestick signals are the most proven technical method in the world. Is the visual depiction of fear and greed. Because candlestick signals are the accumulative knowledge of everybody buying and selling during a specific time frame, the expected results are not based upon high probability possibilities.

The results are created from time-tested reactions of the common investor. It allows investors to pinpoint what investor sentiment is doing. Once you have taken the time to understand the commonsense practices built into candlestick analysis, your investment perspectives will be altered for the rest of your investment career.

­ Stephen W. Bigalow is author of “Profitable Candlestick Investing, Pinpointing Market Turns to Maximize Profits”, “High Profit Candlestick Patterns” and “Candlestick Profits, Eliminating  Emotions” is also principal of the candlestickforum.com, the leading website on the Internet for providing information and educational material about Japanese Candlestick investing.  Over 28 years of extensive study and utilization of candlestick analysis has produced an array of easy-to-learn educational material about Candlesticks. As one of the leading Candlestick experts in the nation, Mr. Bigalow, through consulting with major trading firms, has developed multiple successful trading programs from the day-trader to the long-term hold investor

Posted-In: candle chartingLong Ideas Short Ideas Technicals Psychology Markets Trading Ideas General Best of Benzinga

 

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