Posts Tagged ‘Japanese Candlesticks’
SPX—Correction At Its’ End
As these lines are written, the S & P 500 Index, the one I call The World’s Barometer, as it gives a relatively sure indication of the world markets’ direction, seems to have ended the correction I spoke about in previous articles in this Category. It has, as shown in the Chart below, made a significant Japanese Candlestick pattern called a Hammer and it does indeed look like one. This hammer gives the final blow to the downwards descending pattern and the verification, or Trust, we see tonight is the beginning of a new upwards trend.
The blue lines that surround the price candles are Donchian Channels. When the prices hug these channels at the high end or at the low end for some bars, the prices tend to go up to the signal line (red–in between) and many times past it and correct to the other extreme. Here we see that the Donchian Channels were tested most of the week, and now seems the price’s chance to correct is coming. And it comes just in time.
The Retail Market in the U.S., as represented by their respective equities, is starting to recover from the blows of this harsh Correction. The SPX correction was at the 61.8% Fibonacci Correction Level and those tend to be particularly harsh most of the time. Please check out the Daily Chart below, of a trend-reversal day at 1:33 p.m. EDT of the United States. It speaks for itself.
This is the way the Daily Chart looks:
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The US Natural Gas Fund
The United States Natural Gas Fund (symbol UNG) is now in the process of testing the $7.7 price line that is acting as a resistance. The momentum indicator (MOM) is giving a positive value and that is a good sign; and the RSI is going into buying territory as well. There is a rectangular pattern, as seen in the Closing Line Chart below, that is emerging and is smaller at the right end of the scale and may break upwards, which is the likely way as market indicators show a chance for it to break upwards. The fact that the pattern is diminishing and is not on an upwards ascent and, in contrast the RSI and MOM indicators are showing an upwards trend starting means that there is here what we call a divergence between the indicators and the price line. This shows decision in favor of the upwards trend. This may come soon or later on, but this equity most probably will continue in this pattern for a while.
The indicators show us the way to a good opportunity, though not for certain. There is a high demand for Natural Gas in the US and prices are, fundamentally speaking, supposed to be going up. They may be, if this analysis proves correct and the pattern breaks in the right direction.
Below you see the Japanese Candlestick Chart showing the support/resistance line and the divergence in blue, the indicators going up and the prices down., and the Closing Line Chart showing the rectangular pattern. I picked the Line Chart because is many times makes clear ambiguous signals from the Candlestick Charts as to the placement of Line Studies.
This is the way the divergence looks on the Candle Chart:
This is the way the pattern looks on the Line Charts:
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Lianhua, Chinese for Good Luck
Well, I’m not REALLY sure about that, but I do know a good prospect when I see it. Lianhua, like many other Hong-Kong stocks, has been going up since the beginning of last year. It is positioned in the proper place inside its’ weekly brown-colored upswing tunnel (see weekly Chart below). And it has made a short term run inside the larger, long term tunnel, which I colored in red on the daily Chart shown; the log term tunnel is shown there in blue. The reason I DO NOT say that this run has lasted long enough and finished its’ course is the RSI and MACD, on the one hand, remain in buying territory (see black-background Chart). This lends an added meaning to the very bullish and usually reliable Japanese Candlestick that signals an end to even the short term down series that we saw at the close of session today that is called a “Bullish Hammer”. It does indeed have to look like a hammer and must have a short, green body and a long tail below it extending below the other candlesticks and being at least 3 times the size of the body. Good buy! With this I rest my case.
Please click on the charts to see the complete picture
This is the way the Weekly Chart looks:
This is how the Daily Chart looks:
This is how the Black Background Daily Chart looks:
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S&P on a roll? Just Another Baloney Sandwich!
One would have thought, before Friday, that the sky’s the limit and that the S&P 500 was looking so good you could taste it. Many cafe’s in Downtown Manhattan were offering “S and P on a roll” and people were buying it up from them like hotcakes. It is now 3 p.m. Greenwich Daylight Time as these lines are written, on Sunday, April 18, 2010. And, I have one thing to make perfectly clear. All of the parameters at my disposal are pointing to one conclusion: the roll has turned, overnight, into a rotten egg. The RSI in red and Roc in blue below the chart, both showing oversold parameters on this last S&P roll, have double-backed very quickly into their more normal levels and have thus both started a downward trend themselves. And the S&P 500 itself has made a technical ruckus by showing an unusually large and thick (open to close values) downwards RED Japanese Candle, its’ daily length loss being much higher than the ATR (Average True Range) that measures the daily length of candles as a moving average over, in this case, 34 days, for a longer-term vantage-point. One can see that the ATR, in blue below the chart, has gone down to very small values. This large red candle that was expected because of the length of the rally and the fact that it hit a major long-term resistance line level, has however astonished most analysts by having a much larger body than usual, and also capping off a 3 day Japanese Candlestick pattern known as “An Evening Star”. When this is combined with the fact that the 61.8% Fibonacci line is also so close, it can be said with some certainty that we are witnessing the end of the rally and a major top after which we may see a real downtrend, although, in my opinion, it will be over within a few weeks to a few months and should not be too deep. After that I expect to see the S&P 500 repair back to itself from the correction and go eventually to new highs, although that may take some time.
This is the way the Chart looks: (please click for the complete view)
published by MetaStock(www.equis.com)
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Outside Key Reversal: OKR, for Candlestick afficionados
The second to last red Japanese Candlestick you see below, a red candle that with its length from top to bottom and from high to low (daily) that seems to swallow up the previous green candle wholly is called an OKR, or outside key reversal. It is, as the name implies, a revesal point for a trend, some times minor, some times major. in the example I chose below, for Juniper Networks it may signal the start of a painful downtrend, if not only for the severly morbid looks of the OKR and its’ classical pattern. That is what an OKR usually does usually, it signals a pattern change, or trend shift. Whether it is to the detriment of the equity, as seen here, or if a green candlestick swallows a small red one, to its’ assistance. See my example for Juniper.
This is the way the Chart looks:
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“STICKS” of another kind
This is the truly novice introduction that I dare not take for granted. See below the picture of the red and green Japanese Candlesticks. They are mostly self-explanatory but, I do solemnly swear, I still myself get confused between red and green candlesticks as far as to where the market closing is on them.
So, the closing of the day (base price) is at the high wude green colored end of the green candle—because, and only because the prices went up during intraday trading. This could be even on a day where the market lost from the previous close because of the frequently occurring gaps we see caused by a different opening trade price than the last close. This can happen by news events, people changing their minds or opting out of or into a position; but usually it is due to the bidding session that goes on in most of the major markets.
The closing of the day is also shown in the red candle. It is at the bottom of the wide red colored zone on the candle. The same here as with the green candle. The candle may be red although the base prices (closing quotes) have risen because the intraday prices went down, from opening to closing.
The needle like tops and bottoms of the candle represent the road they travelled through the day up over the open (red candle), or up over the final close (green candle) to a daily high and back, or below the close or open to the daily low and back.
To draw lines, trend, support/resistance or pattern lines, I prefer using the lows of the candles for an upswing, and the highs for a downtrend.
I promise I will give this subject the complete attention it deserves in my next novice post. By the way, don’t forget to look at the illustration below, it should be helpful.
Please note that I intend this to be the 1st in a series of tutoring for the truly beginners, which in the end is intended to take the student to a level of proficiency based on which he/she can trade in.
This is the way the Illustration looks:
