Archives for November 2012

When witnessing a ladder bottom candlestick signal you will notice that the downtrend finishes with four consecutive black (or red) candles. Each black (or red) candle closes lower than the previous day. The fourth day is different since it opens and trades higher during the day and closes the day low. The following day opens higher than the open of the previous day, there is a gap up, and it continues to head up in direction all day. The final day of the signal closes higher than the trading range of the past three days.

Criteria for the Ladder Bottom Signal

• Similar to the three black crows pattern, the beginning of the signal has three black (or red) candle days, each with lower opens and closes than that of the previous day.
• The fourth day resembles a reverse hammer signal, which opens and then trades up during the day before it then closes on its low.
• The final day opens above the open of the previous day’s open. There is a gap up and it continues upward for the rest of the day. It finally closes above the trading range of the previous three days.

Pattern Psychology Behind the Ladder Bottom Candlestick Signal
After a strong downtrend is in effect for a period of time, there is a day when prices try to climb back up to the previous day’s high. This gets the bears attention even though it closes on the low that day. When it opens up much higher the following day, the bears start to scramble to cover, and the bulls begin to take control. If volume increases noticeably on the final day, then that is a good indication that the bulls and the bears exchanged their positions.

Candlestick patterns identify where money is flowing in and out of stocks/sectors. Being able to identify and understand the investor psychology that creates the candlestick signals produces a huge advantage. It allows an investor to participate in stock investments that have an extremely high probability of moving in the right direction.

Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All candlestick patterns have credible probabilities of indicating correct future direction of a price move.

Please continue to learn how to identify each different candlestick trading pattern as well as what that pattern indicates is occurring in the markets.

Description
The homing pigeon is the same as the harami (see bullish harami and bearish harami signals), except for the color of the second day’s body. The homing pigeon is composed of a two-candle formation in a down trending market. Both candles are the same color as the current trend. The first body of the pattern is a long body and the second body is smaller. The open and the close of the second day occur inside the open and the close of the previous day. When a homing pigeon present itself it indicates that the trend is over.

Criteria for Homing Pigeon:

• The body of the first candle is black (or red) and the body of the second candle is black (or red).
• The downtrend is evident for a good period of time and a long black (or red) candle occurs at the end of the trend.
• The second day opens higher than the close of the previous day, and closes lower than the open, but still above the closing price of the prior day.
• Unlike the western inside day, just the body needs to remain in the previous day’s body. Please note that the inside day requires both the body and the shadows to remain inside the previous day’s body.
• For a reversal signal, further confirmation is required to indicate that the trend is moving up.

Signal Enhancements for the Homing Pigeon
The higher the second candle closes up on the first black (or red) candle, the more convincing it is that a reversal occurred.

Pattern Psychology
After a strong downtrend has been in effect and after a long black (or red) candle, the bulls open the price higher than the previous close. The shorts get concerned and start to cover. The price finishes lower for the day but not as low as the previous day. This is enough support needed so that the short sellers take notice that the trend is violated. A strong day following would convince everyone that the trend is reversing. Usually the volume is above the recent norm due to the unwinding of short positions.

Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All candlestick patterns have credible probabilities of indicating correct future direction of a price move.

Description 
The stick sandwich candlestick pattern looks somewhat like an ice cream sandwich. It consists of two black (or red) candles with a white (or green) candle in between. The closing prices of the two black (or red) candles are equal. This demonstrates an obvious support price and the probability of a reversal in the trend is high.

Criteria for Stick Sandwich Candlestick Pattern

• A downtrend is concluded with a large black (or red) candle followed by a white (or green) candle. The white (or green) candle opens above the black (or red) candle’s close, and it closes above the black (or red) candle’s open.
• The final day completely engulfs the white (or green) candle and closes at the same level as the previous black (or red) candle.

Pattern Psychology Behind the Stick Sandwich
The Bears are in control for a while. At the end of the downtrend, the last black (or red) candle is followed by a large white (or green) candle. The white (or green) candle opens higher than the close of the last black (or red) candle. It trades up for the rest of the day and closes above where the previous day opened. This action makes it clear to the Bears that the downtrend may be coming to an end. The following day opens higher but trades down for the rest of the day. It cannot close lower than the previous close of two days prior, which are low. The shorts take notice and start to cover any buying strength over the next couple of days.

Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All candlestick patterns have credible probabilities of indicating correct future direction of a price move.

Continue to learn about more candlestick patterns to see how it can greatly improve your profits! Primary candlestick patterns should be understood first (such as the doji and hanging man patterns). Once you have a basic understanding of the primary signals, move onto the secondary candlestick signals and then eventually the continuation pattern such as this upside tasuki gap pattern.

The average investor does not have to be dependent on the investment professional when utilizing candlestick patterns. Professional recommendations are not always in your best interest at the forefront. Whether totally unfamiliar with investment concepts or very sophisticated in investment experience, the Japanese Candlestick trading formations are easily utilized. The signals and patterns are easy to see and their interpretations are reliable.

Please continue to learn how to identify each different candlestick trading pattern as well as what that pattern indicates is occurring in the markets.

The upside gap three methods is a simplistic pattern, similar to the upside tasuki gap and it occurs in a strong trending market. In an up-trend, a gap occurs between two white (or green) candles, and the final day opens within the top white (or green) body. It closes in the lower white (or green) body which then fills the gap between the first two candles.

Upside Gap Three Methods Image

Criteria for Upside Gap Three Methods:

• In an up-trend two white (or green) candles form
• The second candle in the formation gaps above the first
• The third day opens lower, into the body of the top white (or green) candle and closes into the body of the first white (or green) candle.

Pattern Psychology behind the Upside Gap Three Methods
The market is moving in a direction and then a gap appears between two white (or green) candles. Keep in mind that gaps are significant in that they eventually have to be filled. The fact that the gap fills immediately leads investors to think that the pullback is just a profit-taking pullback. The trend should resume immediately after the gap is filled.

The psychology built into a major candlestick signal is simple common sense investment philosophy. When you learn how to utilize the candlestick patterns correctly you now have the knowledge to improve your trading techniques for those trading entities you want to trade. You do not have to depend on canned programs that sometimes work and sometimes don’t work and you do not have to buy or sell stock recommendations blindly based on a research analyst’s recommendation.

Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All candlestick patterns have credible probabilities of indicating correct future direction of a price move.

Candlestick signals identify where money is flowing in and out of stocks/sectors. Being able to identify and understand the investor psychology that creates the candlestick signals produces a huge advantage. It allows an investor to participate in stock investments that have an extremely high probability of moving in the right direction.

Throughout his investment career, Stephen Bigalow has directed his investment acumen towards developing improved methods for extracting profits from the investment markets. His research, encompassing all fundamental and technical methods, resulted in verifying that Candlestick analysis was superior to any other method.