WHAT EXACTLY IS AN INVESTMENT CLUB?

The concept of Investment clubs has been around for many years and there are literally thousands of these clubs scattered across the nation. There are many of these clubs, which are actively trading today and do so with a reasonable rate of success.

These types of clubs exist in the United States and many other countries around the world. You have likely heard of this sort of club where friends gather on a regular weekly basis to discuss their strategies and their stock picks for the upcoming trade. Possibly you may have even thought about joining and becoming a member of one of these clubs yourself, but really were unsure of the process.

Generally these clubs are run by a group of friendly investors who like to learn about the stock market and in testing in general with a group of fellow investors whom are enjoyable to be around socially. Normally the group meets on a weekly basis, and sometimes the actual meeting is held at one of the members home. All the members will rotate whose home they will meet at so that everyone has an opportunity to host the investment group in their home.

Typically investment meetings are kept as an informal as possible, however real business is discussed and taken care of during these meetings. Most groups are comprised of 10 to 15 members and will either meet weekly, biweekly or on monthly basis. There are some investment clubs that have even started with a onetime physical meeting, and then communicated thereafter with Online. Members can have a meeting and never even leave the comfort of their home.

This is an ideal solution since many of these investment groups have working mothers who are work-at-home Moms as the primary members. With the group meeting Online, it allows for the group members to be home and still carry on the club business. Peoples time is more effective in this way.

Maybe you believe that investment clubs are a way to get rich quick, then you do not fully understand the function of these groups. A normal club will make a group stock purchase and a hold on to it for a number of years before deciding to liquidate the stock. All stock purchases are carefully considered and well researched by the members. Once a club has been established they rarely allow any new members to come into the club, and will only allow a new member should one member leave the group.

On the basis that you have been thinking about getting into the stock market and trying your hand at trading stocks and bonds, then maybe an investment club would be the right ticket for you to begin trading experience. Not only will you learn a wealth of knowledge about the subject of stocks and trading, you get to mix with people that you like and will appreciate the overall experience.

MORE ON THE FOUR-BAR VARIATION OF THE EVENING STAR CANDLESTICK PATTERN

One of the outstanding attributes of Japanese Candlestick financial price reporting is its quite uncanny ability - most of the time, but not all the time - to accurately predict major changes in the direction of price trend. Some Candlestick formations are deemed to be complete with a single price bar; some are complete with two; and some with three or even four.

The "Bearish Engulfing" pattern is one of my favorites. It is quickly spotted when it appears, and very often it is right on target in calling a reversal. The classic Bearish Engulfing pattern is a three-bar formation, and is seen at the top end of an extended advance in prices. It is characterized by a tall white candle as the first bar, indicating that prices advanced during the time period which the bar represents. The second bar of the three will display tight price disparity between the opening price and the closing price (the "real body") and is located above the real body of the first bar. That second bar is the "Star" of the Evening Star pattern. The third bar will be a tall black candle, indicating a meaningful decline in prices from those of the Star. The entire construction is considered bearish.

My particular thesis has to do with a Four-Bar Variation on the Evening Star, which is a pattern not recognized in the literature as a separate pattern, or even as a Candlestick pattern at all. I respectfully maintain otherwise, because it appears relatively frequently and seems to possess the same reversal predictive capacity as does the classic Evening Star. I know that I watch for it all the time, because in my experience it has proven to be worthwhile to pay attention to it.

In a typical four-bar variation of the Evening Star, it will be identified as such if it appears only at the top end of a lengthy price advance, just as in the classic version. Likewise, the first bar will be "classic" in that it will be a tall white candle. The next part makes the difference: instead of a single Star between the tall white candle and the tall black candle, there will instead be two Stars, the closing prices of which will most likely be higher than the closing price of the tall white candle and the price ranges of which will be constrained between opening and closing - that is, they will have small "real bodies" - just as in the classic version. The fourth bar will be a tall black Candle, indicating a substantial fall in prices, exactly like the third bar in the classic.

To my mind, the two small Stars (being the second and third bars) only add to the potential power of the pattern, in that for two days in a row, not just one, investors try to drive prices higher but their effort results only in indecision. The pressure for a downturn (or the lessening of pressure for continued price rise) has been building one day longer; and when the turn comes, it seems to have the potential, at least, of greater force to drive prices lower.

A good recent example of this Four-bar Variation of the Evening Star occurred in the Russell 2000 Index on October 31 and November 3, 4, and 5, 2008. The pattern is as I've described it: first, it occurred at the top end of a long price advance; second, a tall white bar emerged, which was followed by two small stars, both exhibiting higher closing prices than the first bar; and the pattern was completed by a tall black bar signifying a substantial decline in prices. The decline from the top price of the second Star to the bottom of the subsequent tall black Candle was 166.44 points. On a closing-to-closing basis, the decline was 29.4%, accomplished over a 12-day trading period.

The long and short of it is that this Four-bar Variation of the Evening Star Candlestick Pattern appears to have the same predictive price-reversal capacity as the classic three-bar pattern - possibly more so. I submit that it deserves recognition as a legitimate variation of a classic Japanese Candlestick pattern.