Candlestick
Examples
Courtesy of Candlestickshop.com
Daily Candlestick Charting
Weekly Candlestick Charting
3 Black Crows Candlestick Play Instructions
Step 1 - Look for 3 BLACK CROWS resting on Minor Price
Support, and/or a rising Major Moving Average (10 MA, 20 MA, or 50 MA).
Ideally you want to find a series of 3 red candlesticks; however, 2 red
candlesticks can also work well.
Step 2 - Pull up a 15 min. chart of the stock.
Step 3 - Monitor the stock's trading during the last 30
minutes before the close, and enter only if the stock is closing strong near
it's high price of the day. You will reduce your risk by entering only if the
range of the day (high price minus low play price) is narrow. This way, when
you set your protective stop at the day's low, you will only take a small
loss if the stock should reverse.
Step 4 - Observe the daily chart after the market has
closed. The stock has now formed a BULLISH HARAMI on the daily chart, but you
were able to spot the setup on the previous day and enter before the rest of
the herd! On the next day, observe where the stock opens. If the stock opens
relatively near to the opening price (say within 5/8th), place the initial
protective stop 1/8th below the low of the previous day's candlestick. Exit
the stock immediately if the stock breaks below this price. If the stock gaps
up, proceed to Step 6. If the stock gaps down, proceed to Step 8.
Step 5 - Monitor the stock as it continues to rally
upward. Look for areas of support (either minor price support or base price
support) on the 15 minute chart, and re-adjust your protective stop price to
1/8th under these levels of support. This will protect your profits, and/or
minimize your losses if the stock should turn against you.
Step 6 - If the stock closes strong on the previous day,
there is a good chance that the play will be spotted by other traders (note
how a BULLISH HARAMI is formed on the daily chart), and result in a morning
price gap upward. If the stock gaps up by over 5/8 point, sell half of the
position immediately after the open to lock in your profit. Place a
protective stop 1/8th under the first 15 min. candlestick for the remainder
of your position.
Step 7 - Monitor the stock as it continues to rally
upward. Look for areas of support (either minor price support or base
support) on the 15 minute chart, and re-adjust your protective stop price to
under these levels of support. This will protect your profits, and/or
minimize your losses.
Step 8 - It is also possible for the stock to gap down on
the following day due to overall market weakness. If the stock gaps down and
opens 5/8th lower than the previous day's close, DO NOT PANIC AND SELL RIGHT
AWAY. In most cases, the stock will rally after a gap down, and the low price
of the day will occur in the first 5 minutes of trading. Let the stock trade
for 5 minutes and place a protective stop 1/8th below the low of the first 5
minute candlestick. Sell the stock immediately if it breaks this protective
stop.
Step 9 - Monitor the stock as it continues to rally
upward. Look for areas of support (either minor price support or base price
support) on the 15 minute chart, and re-adjust your protective stop price to
1/8th under these levels of support. This will protect your profits, and/or
minimize your losses.
Step 10 - Monitor the stock as it climbs upward, and stay
in as long as the protective stop is not violated. After the stock has
achieved 1 point profit or greater, look for signs of weakness. A bearish
candlestick on the 15 minute chart will serve as a good indicator for a
reversal point. After the price reaches an area of resistance and weakens,
sell half of your position. This may occur on the same day as entry, or on
the following day, depending on the strength of the stock. Maintain the
latest protective stop price for the remaining half of your position.
Step 11 - Allow the stock to continue it's rally. After
the stock has rallied further, again look for an area of resistance where the
stock begins to weaken and reverse. This could be a DOJI candlestick, or any
other reversal candlestick pattern on the 15 min. chart. Sell the remainder
of the position for profit.
Financial Ad Trader
© Copyright 2003 Sunset Capital Management Ann Arbor, Michigan
