The Exponential Moving Average And The Macd

The exponential moving average is a special type of weighted moving average. Like the basic weighted moving average, the exponential moving average is front weighted. Unlike other moving averages, though, the exponential moving average incorporates all prior prices used in the data. This type of moving average assigns progressively smaller weights to each of the past prices. Each weight is exponentially smaller than the previous weight, hence, the name exponential moving average. One of the...

Support And Resistance Lines With Candlesticks

Exhibit 11.1 shows an upward sloping support line. It is made by connecting at least two reaction lows. This line demonstrates that buyers are more aggressive than sellers since demand is stepping in at higher lows. This line is indicative of a market that is trending higher. Exhibit 11.2 shows a downward sloping resistance line. It is derived by joining at least two reaction highs. It shows that sellers are more aggressive than buyers as evidenced by the sellers willingness to sell at lower...

Examples Of The Rule Of Multiple Technical Techniques

This section shows, by example, how a confluence of technical indicators can help predict where important support or resistance may occur. The following examples use Western techniques. The rest cf Part 2 addresses candlesticks. In late October 1989, gold broke above a two-year downtrend resistance line when it closed above 380. This, in combination with the excellent base built in 1989 at 357, was a sign that higher prices were to follow. After gold's breakout in late 1989, Financial News...

The Change Of Polarity Principle

The Japanese have a saying that, a red lacquer dish needs no decoration. This concept of simple beauty is the essence of a technical principle I frequently use with candlestick charting. It is as simple as it is powerful old support becomes new resistance old resistance becomes support. This is what I call the change of polarity principle. Exhibit 11.22 shows support converting to resistance. Exhibit 11.23 illustrates prior resistance becoming new support. The potency of this change of polarity...

Constructing The Candlesticks

Without Oars You Cannot Cross in a Boat'' A comparison between the visual differences of a bar chart and a candlestick chart is easy to illustrate. Exhibit 3.1 is the familiar Western bar chart. Exhibit 3.2 is a candlestick chart of the same price information as that in the bar chart. On the candlestick chart, prices seem to jump off the page presenting a stereoscopic view of the market as it pushes the flat, two-dimensional bar chart into three dimensions. In this respect, candlecharts are...

Counterattack Lines

Bullish Counterattack

Counterattack lines are formed when opposite colored candlesticks have the same close. The best way to describe this pattern is by discussing the illustrations in Exhibits 6.38 and 6.39. Exhibit 6.38 is an example of a bullish counterattack line. This pattern occurs during a decline. The first candlestick of this pattern is long and black. The next session opens sharply lower. At this point, the bears are feeling confident. The bulls then stage their counterattack as they push prices back up to...

The Rule Of Multiple Technical Techniques

Y It is what all eyes see and all fingers point to'' V- andlestick methods, by themselves, are a valuable trading tool. But candlestick techniques become even more powerfully significant if they confirm a Western technical signal. This is the focus of Part 2. For example, if a bullish belt-hold line intersects at a long-term support line, there are two reasons for a bullish outlook. The candlestick indicator confirmed a Western technical indicator or, depending on how you view it, the other way...

The Harami Pattern

Bearish Harami Cross Candlestick Pattern

The harami pattern see Exhibit 6.1 is a small real body which is contained within a prior relatively long real body. Harami is an old Japanese word for pregnant. The long candlestick is the mother candlestick and the small candlestick as the baby or fetus. In Chapter 3, we discussed how spinning tops that is, small real bodies are useful in certain formations. The harami is one of these formations the star, examined in Chapter 5, is another . The harami pattern is the reverse of the engulfing...

Tweezers Tops And Bottoms

Candlesticks Tweezer Tops And Bottoms

Tweezers are two or more candlestick lines with matching highs or lows. They are called tweezers because they are compared to the two prongs of a tweezers. In a rising market, a tweezers top is formed when the highs match. In a falling market, a tweezers bottom is made when the lows are the same. The tweezers could be composed of real bodies, shadows, and or doji. A tweezers occurs on nearby or consecutive sessions and as such are usually not a vital reversal signal. They take on extra...

Three Mountains And Three Rivers

There are a group of longer-term topping and bottoming patterns that include the three mountains, the three rivers, the three Buddha tops, inverted three Buddha, dumpling tops, fry pan bottoms, and tower tops and bottoms. Similar to the Western triple top, the Japanese have a three mountain top see Exhibit 6.44 . It is supposed to represent a major top. If the market backs off from a high three times or makes three attempts at a high, it is deemed a three mountain top. The high point of the...

Dumpling Tops And Fry Pan Bottoms

The dumpling top see Exhibit 6.53 usually has small real bodies as the market forms a convex pattern. When the market gaps down, confirmation of a dumpling top occurs. This pattern is the same as the Western rounded bottom top. The dumpling top should have a downside window as proof of a top. The fry pan bottom see Exhibit 6.54 reflects a market which is bottoming and whose price action forms a concave design and then a window to the upside opens. It has the same appearance as a Western rounded...

The Japanese Chart Of Charts Written Seiki Shimizu

The beginning is most important Some cf you may have already heard cf candlecharts. Probably, many more cf you have not. In December 1989, I wrote an introductory article on candlesticks that precipitated an immediate groundswell of interest. It turned out that I was one of the few Americans familiar with this centuries-old Japanese technique. I wrote follow-up articles, gave numerous presentations, taught classes, and was interviewed on television and by newspapers across the country. In early...