Watch the Charts - Not the News

Watch the Charts - Not the News

The major benefit of candlestick signals is that it tells you exactly what inves­tors are doing. The strongest element of the signals is that it provides a graphic account of what investor sentiment is doing right now.

Consider the definition of smart money. Smart money usually knows what is going on in a stock/ industry well before it becomes public knowledge. When the average investor gets the news, it is usually old news. That is plainly illus­trated when a chart has been declining for two months, then gaps down at the bottom on bad news.

It has to be assumed that the smart money knew what was going on months ahead of time. They were selling anticipating the news coming out sometime in the future. A gap down or a big candle day to the downside on a news announcement should invoke one important question. When everybody else was selling, who was buying?

There are usually very few surprises in the investment world. Somebody usually knows things well in advance of a news announcement. When news stories are being reported on the major financial news stations, the news has probably been built into the stock for a long while. Watch the candlestick sig­nals. When the news appears so bleak that there can’t be any possible way that anybody would want to buy and the charts start showing candlestick buy sig­nals, it provides some very important information. Somebody is buying. Con­versely, how often do you hear investors complain when a company comes out with a great announcement and the price of the stock goes down? The announcement/news is already built into the price.

The candlestick signals produce a visual confirmation of what is actually happening. Buy when candlestick signals indicate a buy, even though the news is terrible surrounding that company/sector. You will have a high likelihood of making profits. Sell when the candlestick signals indicate a sell. Although the future appeal's tremendous, the question always remains, why is somebody selling if the news and the outlook is so wonderful?

Trade the Chart Pattern, Not the Name

Often an investor will not put money into a trading entity when they have lost money in it before. “I lost money in that stock in the past; 1 don’t want to touch it again.” Remember, the markets and stocks do not give a hoot what you think, what you’re going to do, or what you’ve done in the past. Prices are going to move in the manner that will be predictable based upon patterns.

If you run across a chart pattern that shows a very strong signal but then you see that it is a position that lost you money before, do one simple proce­dure. Put your hand over the name and look at the chart. If the chart reveals a strong reason to buy, do not let the name influence your decision.