Description
Book SynopsisInvestors and traders seek methods to identify reversal and continuation to better time their trades. This applies for virtually everyone, whether employing a swing trading strategy, engaging in options trading, or timing entry and exit to spot bull and bear reversals. Key signals are found in the dozens of candlesticks, combined with technical signals such as gaps and moves outside of the trading range; size of wicks (shadows) and size of real bodies. The science of candlestick analysis has a proven track record not only from its inception in 17th century Japan, but today as well. This book explains and demonstrates candlestick signals, including both the appearance of each but in context on an actual stock chart. It further takes the reader through the rationale of reversal and continuation signals and demonstrates the crucial importance of confirmation (in the form of other candlesticks, traditional technical signals, volume, momentum and moving averages). Michael C. Thomsett is
Table of ContentsChapter 1: The Basic Candlestick 1 The Origin and Meaning of the Candlestick 2 Strengths and Weaknesses of Candlesticks 7 Paper Trading as a Testing Ground 12 The Skills Every Trader Needs 15 Candlesticks: General Observations Concerning Their Use 19 Expanding the Information Pool Effectively 22 Chapter 2: Single Stick Signs 27 Uptrends and Downtrends 28 The Significance of a Candlestick’s Shape 31 Variations on the Bullish Long Candlestick 33 The Mistake Pattern 35 The Spinning Top, Hanging Man, and Hammer 41 Line Signals 44 The Significance of Tails 45 Chapter 3: Double Stick Moves 49 Two Reversal Moves: Engulfing and Harami 50 More Reversals: The Inverted Hammer and Doji Star 56 Gaps and Lines 60 Neck Lines, Crows, and Rabbits 68 Reversal and Confirming Moves—Relative Values 78 Chapter 4: Complex Stick Patterns 81 Reversal Trend Change Patterns 82 Inside and Outside Formations 88 Reversal Stars and Abandoned Babies 91 Line and Gap Continuation Signals 95 Tower Tops and Bottoms 105 Chapter 5: Reversal and Continuation Pattern Analysis 109 Strong Top and Bottom Signals 111 Stars, Kicks, Swallows, and Sandwiches 117 Matching and Star Reversals 126 Ladders and “Major” Reversals 130 Sakata’s Five Methods 134 Price Patterns with Low Reliability 142 Strong Price Line Reversals 150 Recognizing the False Signal 165 Chapter 6: Volume and Volatility 169 Volume as a Price Indicator 169 Volume Indicators 174 Testing Price Volatility 183 Triangles and Wedges 185 Chapter 7: Buy and Sell Set-Up Signals 193 Price Spikes and Reaction Swings 196 Percentage Swing Systems 200 Short-Term Gapping Behavior 202 Anticipating the Trend During Consolidation 206 The False Indicator 210 Support and Resistance in the Swing Trade 214 Chapter 8: Swing Trading with Candlesticks 219 A Swing Trading Overview 220 Quantifying Price Movement with Candlesticks 223 The Importance of Convergence and Divergence 226 Primary Trends and Candlestick-Based Entry or Exit 230 Set-Up Criteria and Action Points 234 Selling Short in Swing Trades 239 Chapter 9: Spotting Trends and Using Trendlines 243 Identifying the Trendline 244 Trendlines and Confirmation Signals 249 Applying Moving Averages to Candlestick Analysis 252 The Channel Line 254 Chapter 10: Technical Indicators 257 The Value of Confirmation 258 A Review: Technical Analysis Basics 261 The Significance of Gaps 264 A Framework for Interpretation: Support and Resistance 267 Overbought and Oversold Indicators 270 Relative Strength Index (RSI) 270 Stochastics 272 MACD 273 Bollinger Bands 274 The Potential of Candlestick Signals 278 Glossary 281 Index 297
