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Japanese Candlesticks Ron William Technical Analyst investorsintelligence.com.

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Presentation on theme: "Japanese Candlesticks Ron William Technical Analyst investorsintelligence.com."— Presentation transcript:

1 Japanese Candlesticks Ron William Technical Analyst investorsintelligence.com

2 Market timing, charting, behavioural finance & quantitative analysis. Methodology dates back to 1600s, originally used by Japanese rice farmers to monitor and forecast crop prices. Famous trader named Homma (aware of supply/demand links), realised the markets were strongly influenced by emotions. Introduced to the west in 1990 by Steve Nison, a leading expert in candlestick analysis. Brief History

3 Bullish Candle White Real Body High Close Open Low Bearish Candle Black Real Body Low Close Open High Real Body Upper Shadow Lower Shadow Constructing the Candle Line

4 The Real Body is the essence of market psychology

5 Basic Candles Long Day Doji Spinning Top High Wave 1. Small real body 2. Colour not imp. 3. Long shadows Strong buy/sell Midpoint used as support/resistance support/resistance Open and close are narrow/same Market is tired 1. Small real body 2. Colour not imp. Prior trend weak Indicates confusion Indicates confusion

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7 Doji Criteria: Open and close are narrow or the same Psychology: Market is tired

8 Doji Doji hints market is tired Silver (Weekly Chart)

9 Doji in box range Series of doji within box range merely sets tone USD/ZAR (Daily Chart)

10 Single Line 1. Lower Shadow 2X length of Real Body 2. RB at upper end, colour not important 3. No/very small upper shadow 4. Confirmed with a strong bullish day Hammer Shooting Star 1. Upper Shadow 2X length of Real Body 2. RB at lower end, colour not important 3. No/very small lower shadow 4. Confirmed with a strong bearish day Hammering a base Trouble overhead

11 Hammer GBP/USD (Daily Chart) Support

12 Preferred Sell Risk? Shooting Star Wheat (Weekly Chart) Sell? Selling on close implies risking the pattern high

13 Dual Line Engulfing Dark Cloud Cover Piercing Line 1. Uptrend evident 2. Session opens > prior high 3. Bearish RB closes > 50% into bullish RB 1. Downtrend evident 2. Session opens < prior low 3. Bullish RB closes >50% into bearish RB 1. Large RB wraps around small RB 2. Opposite colours 3. Up/Down trend Arresting control Sentiment reversal

14 Kuwait Stk Mkt (Weekly Chart) Bullish Engulfing

15 Sell Dark Cloud Cover Palladium (Weekly Chart) Midpoint

16 Three Line Morning Star Evening Star 3 White Soldiers 3 Black Crows 1. Three bullish RBs, all of similar size 2. Prior trend is down 3. Each session opens with recent RB & closes near high 1. Downtrend evident 2. Bearish session is followed by indecision. 3. Bulls close > 50% into prior Bear RB 1. Uptrend evident 2. Bullish session is followed by indecision. 3. Bears close > 50% into prior Bull RB 1. Three bearish RBs, all of similar size 2. Prior trend is up 3. Each session opens with recent RB & closes near lows Upside reversalDownside reversal Uptrend Downtrend

17 Support and Resistance Support and Resistance Trend-lines Trend-lines Price Patterns Price Patterns Moving Averages Moving Averages Oscillators Oscillators Elliott Wave Elliott Wave Optimises and confirms Price targets Price targets Western charting

18 Moving Averages Gold (Weekly Chart) Piercing Line High-wave Hammer 70-week average

19 Soybean (Daily Chart) Price Patterns 3 White Soldiers Morning Star Bullish Engulfing 3 White Soldiers Shooting Star 3 White Soldiers (variant)

20 38.2% 50% EUR/USD (Daily Chart)Confluence61.8% Measured Objective

21 Relative Strength Index CRB (Weekly Chart)

22 Bollinger Bands Dark Cloud Cover Hammer High-Wave Bullish Engulfing Bearish Engulfing Hammer Hammer Oil (Daily Chart)

23 Elliott Wave Gold (Daily Chart) (1) (2) (3) (4)?

24 Corrective Wave (4)? Gold (Weekly Chart) (3) Hanging Man Piercing Line Dark Cloud Cover (4)? Hammer

25 Trading Rules Wait for the sessions close to confirm Wait for the sessions close to confirm DO NOT use candles in isolation DO NOT use candles in isolation Always consider Risk/Reward ratios before placing a trade with a candle signal Always consider Risk/Reward ratios before placing a trade with a candle signal Candles DO NOT offer price targets Candles DO NOT offer price targets Remember the importance of stops Remember the importance of stops

26 Human Emotion Drives the Market Human Emotion Drives the Market Candle Analysis Unrivaled in Gauging Market Psychology Presentation slides designed by Ron William


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