McGraw-Hill New York San Francisco Washington, D.C. Auckland BogoU Caracas Lisbon London Madrid Mexico City Milan Montreal New Delhi San Juan Singapore Sydney Tokyo Toronto [...]... Figures 1-4 and 1-5 , you can see that the Japanese candlestick chart really does not display anything different from the standard bar chart However, once you become accustomed to seeing Japanese candlestick charts, you will prefer them because their clarity is superior and allows a quick and accurate interpretation of the data This matter of interpretation is also what this book is about Japanese candlestick. .. that Doji also means "goof or "bungle." Long-Legged Doji (jujn Figure 2-8 The Long-Legged Doji has long upper and lower shadows in the middle of the day's trading range, clearly reflecting the indecision of buyers and sellers (Figure 2-8 ) Throughout the day, the market moved higher and then sharply lower, or vice versa It then closed at or very near the opening Candlestick Lines price If the opening and... below the? previous day's long body (Figure 2-1 2) Ideally, the gap should encdrnpass the shadows, but this is not always necessary A Star indicates some uncer- A candle pattern can be a single candlestick line or multiple candlestick lines, seldom more than five or six In Japanese literature, there is occasional reference to patterns that use even more candlesticks, but they will be included in the... Engulfing pattern is also a follow-through, or more advanced stage, of the Piercing Line and the Dark Cloud Cover Because of this, the Engulfing pattern is considered more important Examples Figure 3-8 A **«•! I13B1 Chapter 3 Reversal Candle Patterns Figure 3-8 B Commentary The Harami pattern is made up of the opposite arrangement of days as the Engulfing pattern (Figures 3-9 and 3-1 0) Harami is a Japanese word... (Figures 3-3 0 and 3-3 1) The next day, prices gap in the direction of trend, then close at the opening This deterioration of the previous trend is immediate cause for concern The clear message of the Doji Star is an excellent example of the value of the candlestick method of charting If you were using close only or standard bar charts, the deterioration of the trend would not quite yet be apparent Candlesticks,...Chapter 1 Candlestick Charts Japanese candlestick charts do not require anything new or different as far as data are concerned Open, high, low, and close are all that is needed to do candlestick charting Many data vendors do not have open prices on stocks This problem can be addressed by using the previous... day This action causes concern to the bears and a potential bottom has been made Candlestick charting shows this action quite well, where standard bar charting would hardly discern it The Piercing Line pattern reduces to a Paper Umbrella or Hammer line, which is indicative of a market reversal or turning point (Figure 3-2 5) The single candle line reduction fully supports the bullishness of the Piercing... Marubozu Marubozu means close-cropped or close-cut in Japanese Other interpretations refer to it as Bald or Shaven Head In either case, the meaning reflects the fact that there is no shadow extending from the body at either the open or the close, or at both Reference to long days is prevalent in most literature dealing with Japanese candlesticks Long describes the length of the candlestick body, the difference... single daily lines is the beginning of Japanese candlestick analysis A few definitions should be given first Remember, these terms and descriptions all refer to only a single day of trading Depictions of candle lines and candle patterns will use a shaded day to show when body color, black or white, is not important Candlestick Lines Short days, shown in Figure 2-2 , may also be based on the same methodology... 3 Reversal Candle Patterns Hammer and Hanging Man (kanazuchi/tonkachi and kubitsuri) Confirmation is definitely required Commentary The Hammer and Hanging Man are each made of single candlestick lines (Figures 3-1 and 3-2 ) They have long lower shadows and small real bodies that are at or very near the top of their daily trading range These were first introduced as paper umbrellas in Chapter 2 They are . business news. This analyst spoke of 34-day and 54-week market cycles and head-and-shoulder bottoms and wedge formations. I thought it was so much mumbo-jumbo until the summer of '82 when. doesn't know it, but Greg Morris taught me a lot about technical analysis. Or, more accurately, his N-Squared software did. For a couple years during the mid-80's, I hand-entered the daily. example. But I'll let Greg Morris tell the story from here. I just hope my 90-year old friend is still around to read it. I think he would like it. Japanese candlestick charting and analysis