Constructing The Candlesticks
Without Oars You Cannot Cross in a Boat'' A comparison between the visual differences of a bar chart and a candlestick chart is easy to illustrate. Exhibit 3.1 is the familiar Western bar chart. Exhibit 3.2 is a candlestick chart of the same price information as that in the bar chart. On the candlestick chart, prices seem to jump off the page presenting a stereoscopic view of the market as it pushes the flat, two-dimensional bar chart into three dimensions. In this respect, candlecharts are...
More Reversal Formations
Put a Lid cn What Smells Bad The reversal formations in Chapters 4 and 5 are comparatively strong reversal signals. They shew that the bulls have taken ever from the bears as in the bullish engulfing pattern, a morning star, cr a piercing pattern cr that the bears have wrested control from the bulls as in the bearish engulfing pattern, the evening star, or the dark-cloud cover . This chapter examines more reversal indicators which are usually, but not always, less powerful reversal signals....
A Historical Background
Through Inquiring cf the Old We Learn the New This chapter provides the framework through which Japanese technical analysis evolved. For those who are in a rush to get to the meat of the book that is, the techniques and uses of candlesticks , you can skip this chapter, or return to it after you have completed the rest of the book. It is an intriguing history. Among the first and the most famous people in Japan to use past prices to predict future price movements was the legendary Munehisa...
Rising And Falling Three Methods
These three methods include the bullish rising three methods and the bearish falling three methods. Note how the number three again makes an appearance. These are both continuation patterns. The benchmarks for the rising three methods pattern see Exhibit 7.25 include EXHIBIT 7.25. Rising Three Methods I 2. This white candlestick is followed by a group of falling small real body candlesticks. The ideal number of small candlesticks is three but two or more than three are also acceptable as long...
Counterattack Lines
Counterattack lines are formed when opposite colored candlesticks have the same close. The best way to describe this pattern is by discussing the illustrations in Exhibits 6.38 and 6.39. Exhibit 6.38 is an example of a bullish counterattack line. This pattern occurs during a decline. The first candlestick of this pattern is long and black. The next session opens sharply lower. At this point, the bears are feeling confident. The bulls then stage their counterattack as they push prices back up to...
The Rule Of Multiple Technical Techniques
y It is what all eyes see and all fingers point to'' V- andlestick methods, by themselves, are a valuable trading tool. But candlestick techniques become even more powerfully significant if they confirm a Western technical signal. This is the focus of Part 2. For example, if a bullish belt-hold line intersects at a long-term support line, there are two reasons for a bullish outlook. The candlestick indicator confirmed a Western technical indicator or, depending on how you view it, the other way...
The Harami Pattern
The harami pattern see Exhibit 6.1 is a small real body which is contained within a prior relatively long real body. Harami is an old Japanese word for pregnant. The long candlestick is the mother candlestick and the small candlestick as the baby or fetus. In Chapter 3, we discussed how spinning tops that is, small real bodies are useful in certain formations. The harami is one of these formations the star, examined in Chapter 5, is another . The harami pattern is the reverse of the engulfing...
Tweezers Tops And Bottoms
Tweezers are two or more candlestick lines with matching highs or lows. They are called tweezers because they are compared to the two prongs of a tweezers. In a rising market, a tweezers top is formed when the highs match. In a falling market, a tweezers bottom is made when the lows are the same. The tweezers could be composed of real bodies, shadows, and or doji. A tweezers occurs on nearby or consecutive sessions and as such are usually not a vital reversal signal. They take on extra...
The Morning And Evening Doji Stars
When a doji gaps above a real body in a rising market, or gaps under a real body in a falling market, that doji is called a doji star. Exhibit 5.2 shows doji stars. Doji stars are a potent warning that the prior trend is apt to change. The session after the doji should confirm the trend reversal. Accordingly, a doji star in an uptrend followed by a long, black real body that closed well into the white real body would confirm a top reversal. Such a pattern is called an evening doji star see...
Tower Tops And Tower Bottoms
The tower top is a top reversal pattern. It occurs while the market is in an uptrend and then a strong white candlestick or a series of white candlesticks appears. The market's rise then slows and the highs start falling. The tower top is completed with the appearance of one or more large black candlesticks see Exhibit 6.58 . This pattern's long candlesticks resemble tall towers hence the name. 10 2 CC WEEKLY BAR 1990 CQG INC. L 1230 Fry Pan Bottorr C 1262- Jul Oct EXHIBIT 6.57. Cocoa Weekly...
Upsidegap Two Crows
An upside-gap two crows what a mouthful is illustrated in Exhibit 6.30. The upside gap refers to the gap between the real body of the small black real body and the real body preceding it the real body which precedes the first black candlestick is usually a long white one . The two black candlesticks are the crows in this pattern. They are analogous to black crows peering ominously down from a tree branch. Based on this portentous comparison, it is obviously a bearish pattern. An ideal...
Belthold Lines
The belt hold is an individual candlestick line which can be either bullish or bearish. The bullish belt hold is a strong white candlestick which opens on the low of the day or with a very small lower shadow and moves higher for the rest of the day. The bullish belt-hold line is also called a white opening shaven bottom. If, as in Exhibit 6.25, the market is at a low price area and a long bullish belt hold appears, it forecasts a rally. The bearish belt hold see Exhibit 6.26 is a long black...
Three Mountains And Three Rivers
There are a group of longer-term topping and bottoming patterns that include the three mountains, the three rivers, the three Buddha tops, inverted three Buddha, dumpling tops, fry pan bottoms, and tower tops and bottoms. Similar to the Western triple top, the Japanese have a three mountain top see Exhibit 6.44 . It is supposed to represent a major top. If the market backs off from a high three times or makes three attempts at a high, it is deemed a three mountain top. The high point of the...
Dumpling Tops And Fry Pan Bottoms
The dumpling top see Exhibit 6.53 usually has small real bodies as the market forms a convex pattern. When the market gaps down, confirmation of a dumpling top occurs. This pattern is the same as the Western rounded bottom top. The dumpling top should have a downside window as proof of a top. The fry pan bottom see Exhibit 6.54 reflects a market which is bottoming and whose price action forms a concave design and then a window to the upside opens. It has the same appearance as a Western rounded...
The Japanese Chart Of Charts Written Seiki Shimizu
The beginning is most important Some cf you may have already heard cf candlecharts. Probably, many more cf you have not. In December 1989, I wrote an introductory article on candlesticks that precipitated an immediate groundswell of interest. It turned out that I was one of the few Americans familiar with this centuries-old Japanese technique. I wrote follow-up articles, gave numerous presentations, taught classes, and was interviewed on television and by newspapers across the country. In early...