Candlestick
Examples
Courtesy of Candlestickshop.com
Daily Candlestick Charting
Weekly Candlestick Charting
3 Soldiers Candlestick Play Instructions
Step 1 - Look for 3 WHITE SOLDIERS against Minor Price
Resistance, and/or a declining Major Moving Average (10 MA, 20 MA, or 50 MA).
Ideally you want to find a series of 3 green candlesticks; however, 2 green
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 weak near
it's low price of the day. You will reduce the risk of the 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 high, 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 BEARISH 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 above the high of the previous day's candlestick. Exit
the stock immediately if the stock breaks above this price. If the stock gaps
down, proceed to Step 6. If the stock gaps up, proceed to Step 8.
Step 5 - Monitor the stock as it continues to decline
downward. Look for areas of resistance (either minor price resistance or base
price resistance) on the 15 minute chart, and re-adjust your protective stop
price to 1/8th above these levels of resistance. This will protect your
profits, and/or minimize your losses if the stock should turn against you.
Step 6 - If the stock closes weak on the previous day,
there is a good chance that the play will be spotted by other traders (note
that it has now formed a BEARISH HARAMI on the daily chart), and result in a
morning price gap downward. If the stock gaps down by over 5/8 point, cover
half of the position immediately after the open to lock in your profit. Place
a protective stop 1/8th above the high of the first 15 min. candlestick for
the remainder of your position.
Step 7 - Monitor the stock as it continues to decline
downward. Look for areas of resistance (either minor price resistance or base
resistance) on the 15 minute chart, and re-adjust your protective stop price
to above these levels of resistance. This will protect your profits, and/or
minimize your losses.
Step 8 - It is also possible for the stock to gap up on
the following day due to overall market strength. If the stock gaps up and
opens 5/8th higher than the previous day's close, DO NOT PANIC AND COVER
RIGHT AWAY. In most cases, the stock will sell off after a gap up, and the
high 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 above the high of
the first 5 minute candlestick. Cover the stock immediately if it breaks this
protective stop.
Step 9 - Monitor the stock as it continues to decline
downward. Look for areas of resistance (either minor price resistance or base
price resistance) on the 15 minute chart, and re-adjust your protective stop
price to 1/8th above these levels of resistance. This will protect your
profits, and/or minimize your losses.
Step 10 - Monitor the stock as it declines downward, 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 strength. A bullish
candlestick on the 15 minute chart will serve as a good indicator for a
reversal point. After the price reaches an area of support and strength,
cover half of your position. This may occur on the same day as entry, or on
the following day, depending on the weakness 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 decline. After
the stock has declined further, again look for an area of support where the
stock begins to strengthen and reverse. This could be a DOJI candlestick, or
any other reversal candlestick pattern on the 15 min. chart. Cover the
remainder of the position for profit.
Financial Ad Trader
© Copyright 2003 Sunset Capital Management Ann Arbor, Michigan
