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There are two economic factors that make timing the market now more lucrative than ever. The first is major market indexes continuing to hit all-time highs. Second is the increased market volatility that comes with a new presidential administration.
You see, timing the market now could make the difference between buying stocks too high or getting into a trade ahead of the crowd.
However, most people think timing the market can't be done. That's because their financial adviser continues to warn them against it. But these advisers are talking about timing the market as a whole.
No one can time the market as a whole. Too many unknown things can happen at any given time. For instance, few predicted the extended "Trump Bump" (except of course our own Chief Investment Strategist Keith Fitz-Gerald).
While you can't predict the overall market, one thing you can predict is which individual stocks will rise or sink. Individual companies are easier to predict because of their metrics and seasonal business cycles.
In fact, Money Morning Options Trading Specialist Tom Gentile recently netted his readers a 100% return in 24 hours by timing the market. On Jan. 30 he saw the buy signals for AbbVie Inc. (NYSE: ABBV) and advised his readers to buy call options. By Tuesday afternoon, the trade had doubled.
Gentile prefers visualizations and graphs in market timing strategies. His favorite is Japanese Candlestick Charts. These charts let you see a stock's open and close prices and everything in between at a glance.
"Like many professional traders, I favor these charts because of the story they tell over and above your basic bar chart," said Gentile.
Best of all, once you understand the basics of candlestick charts, you can combine them with other strategies for timing the market for maximum profit…
How to Boost Profits with Japanese Candlestick Chart
Gentile loves candlestick charts because they give you so much information at just a glance. A single candlestick can tell you the open price, close price, high price, and low price for a stock on any given day. All of that information forms what is called the "body" of a candlestick.
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The body of the candlestick is formed by the open and close price of the stock. If the stock is bullish (rising), the open is the bottom line of the rectangle, and the close is the top line of the rectangle. The color of the body of a bullish candlestick will be either white or green.
If the candlestick is bearish (falling), the open price is the top line of the rectangle, while the close is the bottom line of the rectangle. It will be colored either black or red to show that the stock price dropped that day.
The uppermost point of the candlestick is the highest point the stock traded that day, while the lowest point of the candlestick is the lowest point the stock traded. The high point and low point show you the trading window of stock for that particular day.
The chart below explains how each candlestick body is formed.
With each day of trading summed up in a single candlestick, you can easily see trends.
By compiling a month of data, you can see if the close price for a stock is rising or falling. You can also see how wide of a range a stock is trading day to day. All of this information helps you to determine when to enter and exit a trade.
For example, the Health Care Select Sector SPDR chart to the right shows a bearish trend. Overall it has more bearish days than bullish days (as can be seen by having more red candlesticks than green). The index also has more days that are bearish than bullish with a wide trading range for the day.
Aside from general trends that can be seen, there are specific patterns to look for to know when a trend is about to reverse…