TraderDye: Does it matter how long the shadows last?

Candlestick1: Yes. The greater the length of the shadows/tails, the more forceful the reversal will be. A doji is nice to see. A long-legged doji is better to see.

RV6A: Does high volume on a doji day have a special meaning?

Candlestick1: Yes. High volume on the indecision day tells me the panick selling is being bought by those who buy at the bottom

Fieldcrestcf: On a doji, does the open and close have to be equal? Is there any room for variance . .. such as being different by 0.01 or 0.05 or 0.10 points?

Candlestick1: The open and close on a doji just need to be near, not exact. A small body is a spinning top, which is the same [in meaning] as a doji = indecision.

KICKER: Kickers are not seen as often as the other major signals but it is THE MOST POWERFUL of all signals. It opens the first day and closes in a direction. The next day it opens at or above the previous day’s open, a gap up, and closes in the opposite direction of the previous day.

This is usually experienced when news has occurred overnight. Stochastics do not matter in this signal, although their being in the right area helps. Always buy or sell the kicker signal. It works an extremely high percentage of the time, enough to say with great conviction, always buy the kicker signal.

Examples listed: ACE, KSS

kmack: Clear candle kicker at CKFR August ’02 bottom. Wish I’d stuck with that one and gone on vacation!

A kicker opens the first day at X and the price goes down, forming a dark candle. The next day, the price opens at X again, a gap up, yet then the trading goes in the opposite direction of the previous day, creating a white candle. This shows a severe change of investor sentiment.

Jazzy: Kicker is not described in Steve Nison’s candlestick book. Is it your own creation?

Candlestick1: Again, the kicker is a scan that should be done everyday. There may be days -- if not weeks -- at a time where a kicker signal will not be seen, but when they do occur, you want to put funds into that trade. Example, ADIC Feb’03 daily. At 11, shows the definite change in investor sentiment = a strong kicker signal on 2/11/03.

McDermojo: Just to confirm a kicker requirement: Does the second day have to open at or above the previous day’s open—or simpley be an open cnadle following a closed candle—and the bigger the better?

Candlestick1: The kicker needs to open above the previous day’s open. The second example sounds like you are describing a bullish engulfing signal.

jynkin: ONT: Is this an example of the Kicker formation just yesterday?

Candlestick1: showing ONT chart: Yes, but it is more a move up away from an inverted hammer signal, a good bullish signal, but not a true kicker.

Candlestick1: Yes kickers work equally well in both directions.

McDermojo: The negative kicker requiring that the open be lower than the previous day’s open then – a gap down even clearer?

Candlestick1: Yes, a bearish kicker is a gap down opening at or below the previous day’s open and heading further down

da2rth: WEDC: would this doji be a bullish kicker?

Candlestick1: No. WEDC, that is not a kicker signal

Barnabus: Does a kicker need a certain percentage gain from the previous day for you to be interested in it?

Candlestick1: The clear kicker signal will have a large [negative] candle down, then a long white [positive/clear] candle up.

Candlestick1: No %, just a visually clear reversal in sentiment.

HARAMI: The harami is when the next day opens and closes inside the open and close of the previous day. This signifies that the trend has stopped. It needs to be confirmed the next day to show the reversal and how powerful that reversal will be.

Example, WIN Mar ’03.

DT = bearish harami, mid-Feb ‘03

The bullish harami is the opposite

kmack: Candle1 . .. What are we looking for in haramis? If the close is more than ½ way up the previous down candle, then it signals end of trend? Would you wait for a buy signal?

Candlestick1: The higher the close in the previous day’s candle on a harami, the better the uptrend should be, buy you still want to see it open UP strong the next day.

[not on the original list cited, but related pattern: Engulfing pattern]

ENGULFING PATTERNS:

A bullish engulfing signal is found at the bottom (RGLD, Feb ’03). It is formed by the next day opening below where it closed the night before and closing above where it opened the night before, completely engulfing the previous day’s body.

atravelor: Candle, you mentioned AVII frequently .. please take us through some of the signals you saw.

AVII: the big bullish engulfing pattern has us in this stock now

AEPI: Bought AEPI on March 18 on bullish engulfing pattern (daily chart—occurred 3/17/03)

July: Does the bearish candle always need to engulf a positive candle the day before or can it engulf a smaller negative day from the day before, and vice ersa for a bullish engulfing candle?

[no response]

DARK CLOUD:

ADIC 1/10/03 was a dark cloud cover, w/ shooting star earlier in chart

BRCM: dark cloud formations in Jan ’03.

PIERCING PATTERN: the opposite of DARK CLOUD—and a derivative of the bullish engulfing pattern. It closes more than halfway up the previous bearish candle.

HAMMER: Hammers are signals that will be seen a lot at the end of a downtrend. The Japanese say that the bears are trying to hammer out the bottom.

Q: Can the handle of the hammer go in either direction?

The hammer is at the bottom with the tail being at least twice > body.

Q What about a hammer near a top, like EMC? What is this telling us?

szasza: Is the length of shadow similarly important in hammers and hanging men?

Candlestick1: Yes. The longer the tails in hammers and shooting stars, the more power will be seen in the reversal.

HANGING MAN: A hammer at the top is now a hanging man. It is a sell signal and needs to see a lower open the next day.

The hanging man is found at the top of a trend. It needs to be confirmed with a lower open the next day.

Examples: WDC. MIMs, a hammer. Feb 20, ’03 approx.

INVERTED HAMMER: An inverted hammer found at the bottom has the tail on top and the body on the bottom.

MANT: MANT bought on a confirmed inverted hammer, which occurred March ‘03

SHOOTING STAR: The shooting star shows that the bulls have tried to push the price up, but the bears have now taken over.

ADIC, Jan 10, ’03 approx.

Good idea to learn to recognize these patterns. Can be easily seen.

The signals are no harder than abcs. If I see an obvious signal forming with 15 minutes left to go in the day, I will close that position.

Once you recognize the signals, you now control your own investment future.

SHAVED CANDLES:

zenvestor: Can you touch on significance of shaved candles?

Candlestick1: After a long uptrend, when you see a candle close at the very high of the day [definition of shaved candle], no shadow at, that is usually the last of the shorts being squeezed. Look for selling the next day.

McDermojo: Is SOHU on 3/26/03 an example of a shaved candle—shorts all squeezed out?

Candlestick1: SOHU, I show a small shadow on the 3/26 candle. [With] The doji/harami the next day, would have closed the position

APPLICABILITY

Dolphin: Is candlestick also effective for news-driven market such as now, or just in orderly trending market?

Candlestick1: Candlesticks are the cumulative knowledge of everybody that partook in the buying and selling that day. It is the info that tells you what the investors are doing. They work well especially when the market price is being thrown out of whack.

APPLICABILITY IN DIFFERENT PRICE RANGES:

zenvestor: You said these signals are good in all time frames. Would you consider them reliable in all price ranges, including pennystocks?

Candlestick1: Yes. They work whereever you have fear and greed. They are good for pennystocks, commodities, bonds, futures, tulip bulbs.

Camer: Candle, do you use candles for intraday trading? Any tips and suggestions?

Candlestick1: Yes, use candles with 1, 5, and 15 minute charts, trading the e-minis, or any other intraday trade.

LENGTH OF APPLICABILITY OF A SIGNAL:

Patterns are good for any timeframe you want to view.

ManLopez399: Candle: for how many days is the signal good for or discard it, like what you mentioned with EMC?

Candlestick1: A signal stays in effect until an opposite signal stops the trend or if the initial signal is negated. That means your profits run well; your losses are stopped very quickly.

Saroj: As far as the ‘length of time’ issue, if one uses a weekly or 3-day time period, is the indication also good for the next week or 3-day period?

Candlestick1: The length of time of the signal is correlated to the length of time you want to be investing. A weekly chart is for somebody that wants to hold for a few months at a time; daily charts for somebody that wants to hold for 3 to 7 days at a time.

CONFIRMATION:

Manlopez3099: In IMCL, we didn’t need the stoc in oversold area to confirm . . .

Candlestick1: The signal always overrides the stochastics. The signals tell us what is actually happpening; the stochastics confirm whether they are happening in the most favorable condition.

imlucky: Does volume matter at the turn or are you mainly watching stochastics?

Candlestick1: Mainly stochastics, but the volume spike at or near a turn is showing that the weak have sold to the strong.

USE OF MACD:

Mike: Do you use the MACD signals in your chart template?

Candlestick1: I use MACD just as an added fuzzy. It works well to show when a trend will hae a bigger break occur when it comes up across the line.

Fieldcrestcf: How do you incorporate the MACD into reading candlesticks?

Candlestick1: MACD has very small input in a buy decision. The signal and the stochastics are 95% of the decision. Volume, MACD, and the direction of the market comprise the rest.

STOCHASTIC SETTINGS FOR DIFFERENT TIMEFRAME TRADING:

CacheFleaux: Regarding the PCF scans, what formula parameters do you use to relate Stochastics (overbought, oversold) to the desired candlestick patterns?

Candlestick1: I use 12, 3, 3, for swing trading; 14, 5, 5, for long term holds.

12, 3, 3 and 2, 2, 2 combination for day trading.

KidsandLearning: I know how to read stochastics, but not two stochastics in the same window. Sometimes they seem to be sending different signals. How do the two relate?

Candlestick1: Two stochastics are used to keep yourself from being whipsawed

Caegan: I’m noticing on shared charts that the stochastics setting in Window2 is 12, 4, 3, yet your recommended setting was 12, 3, 3. Meaning?

Candlestick1: They are basically the same. Do not get too fined tuned. The stochastics just indicate whether you are in or near the overbought or oversold area.

STRATEGY:

The example signals are not ones that had to be hunted for. A good practice for learning candlesticks is to scroll back through charts. Find where the stochastics have peaked or bottomed, then see what the trend did at that time. Then analyze what you see at that turn. You will be surprised at how often there . . .

RIMM, April 3: Remember a signal is a signal and should be occurring in overbought or oversold areas.

Note that the stochastics on April 3 RIMM do not show it to be either oversold or overbought.

ASL

ACE

ELY December

WDC Dec 3, 2002.

kmack: how important are stochastics in your candlestick analysis?

EMC: note where the stochastics (12,4,3 settings) are. This would tell me that it’s getting toppy. Look for a day or two more to the upside before the trend turns.

There are consistent technical formations that provide high probability profits. i.e. the J-Hook pattern, the Fry Pan bottom, The Dumpling Top, Channels, Gap Ups, Gap Downs, and Banner formations, all seen in Western technical analysis, become enhanced when using the candlestick signals. The signals demonstrate what is actually happening at specific levels, that the rest of the technicians are waiting to see if that level will be confirmed or not. RFMD is a good trading stock because the signals occur at clear reversal points that everybody else is watching.

Knowing these few signals and learning how to apply them to gaps, kickers, and the emotions of the masses, there is no reason a trader cannot make at least 10% monthly, just on straight stock longs or shorts. Option trading and margin accts, that much more so. Commodities are easier to trade with candlestick signals than stocks are.

Not to pound our own chests, but those of you that follow our picks should notice that we have an inordinate amount of picks that work in the right direction. Additionally, it is not unusual to see one, if not more, of our picks on the ‘Biggest Percentage Movers’ list on any given day. This is an effect of the signals pinpointing where the buying and selling is actually coming in.

kmack: Of note also is that Steve was advising his subscribers to go long a few days before both the October and March lows

There are a good number of people who are good at fading the Gaps. WildBill is great at that trading. This is much more effective when the Gap occurs at the top of a trend. Keeping in mind, the Japanese have already witnessed that the exuberance occurs at the top. That is the sell signal, after a trend has been going up for an extended period of time, everybody now feels that the stock will go up forever. They gap it up because they are so anxious to get into the position. That is when the smart money starts selling it to them. A gap at the top is time to get out.

BlueCollar: The DT chart seems to be gapping up and down almost daily. Are there any charts that you would pass up using candlesticks?

Candlestick1: DT, yes, this is a foreign stock but can still utilize the candles.

Breck: I have noticed that a lot of your recent recommendations in chat have been in the pharma or biotech sectors. Comments please.

Candlestick1: This is not something that I do, because before candlesticks came along, I was one of the worst investors in the world. Now, after learning candlesticks, I go to bed every night knowing that I have an extremely high probability that the net total of all my positions the next day will be profitable.

CKFR

lhooker: Do you use your procedure (changing stochs to over 80) when looking for short candidates?

Candlestick1: Yes. The same parameters with stochastics over 80, then sort by the biggest percentage move down.

isay: What about shorting techniques? Currently, we presumably are in a bull trend, so shorts should probably be limited to scalps. But how many of the described sell signals would be equally applicable to short sells vs closing longs?

Candlestick1: Selling a long or going short are equal. However, if I have a big profit in a stock and see a sell signal, that doesn’t mean I need to short it. There may be better short signals elsewhere that day.

VOLUME REQUIREMENTS:

energetic: Do you have an average minimum daily volume to further screen stocks?

Candlestick1: 200,000 shares for investors; 500K for the mutual funds I do consulting for. $5 or greater on price, because knowing tht the probabilities are in my favor, I want to be able to margin as much as I can.

RV6A: What’s the largest position you will take on a stock that has avg vol of 200,000 per day. This is for Hotto also.

Candlestick1: 200,000. Would not want to own more than 20,000 shares, and that should be accumulated over a period of a few days

TRADE PLANNING:

Mike: Do you risk/reward calculations or set price targets before entering a trade?

Candlestick1: I target to make 10% or greater on each trade, knowing that most trades will be 3%, 5%, 8% profits

szaza: To ask Mike’s question another way: is there a measurement implied by some candles?

hotto: Is there a Profit% measurement implied by some candles?

Candlestick1: No, the candles just show directions. The gaps or the length of the shadows will imply the magnitude of the next trend.

Candlestick1: The way I search for the best picks each day is to do a scan for stocks > $5, volume > 200,000 shares per day, and with stochastics below 20. Then I sort that group by the ‘Biggest Percentage Movers’ that day. This will give me oversold stocks with a a lot of buying that day. I will find five excellent trades in the first 30 stocks found.

PCFs:

Woodbridge: Where can we find a scan for the kicker?

Harley: Where did you say to get pcf?

Candlestick1: The PCFs are on our site, or you can email the site for a specific PCF.

Candlestick1: The PCFs and the signals can be found on our website, www.candlestickforum.com, for those of you that are following our picks know that we are up 105% since last February, 2002. This is not me being a great soothsayer; this is just being in the right positions at the right time.

hotto: Great picking, Candle!

isay: Could you describe an example of money management techniques? Do you commit a ½ position based on bullish engulfing, and then add to on a kicker or other confirmation? Also, profit taking … do you typically sell the entire long position at once or do you take partial profits in ambiguous situations?

Candlestick1: 8 to 10 positions should be the most one should trade at one time. I will buy a half position on a signal setting up, and then fill the other half upon confirmatin. Will sell half a position with good profits on the first signs of sell signals, and the other a day or two later, on further confirmation.

SPECIFIC STOCKS & MISCELLANY:

VJnet: The Qs have had quite a run this week. Does Thursday’s candle signal a change in direction, that was confirmed yesterday?

hotto: QQQ 4/3/03

Candlestick1: Yes. The Qs concern me as being a cause to look for lower prices, yet the DOW looks stronger.

McDermojo: Does Friday approximate a hanging man?

[no answer]

McDermojo: With WEDC, because the close is right in the middle of the candle and needs further confirmation on Monday?

Candlestick1: The doji at this point is not in the overbought area of the stochastics

Saroj: WEDC, this shows a doji on 4/4. If you were long, would you sell or what for confirmation? If wait, what would be the confirmation signal?

Candlestick1: WEDC, at the doji Friday, the open the next day will tell you which way the trend will go.

energetic: You mentioned the 8 to 10 candle [patterns], the kicker being a high probability of success of achieving say, 10%, target. Could you list the other candles patterns from highest to lowest probablility of success. Or the top 3 to 5 patterns with high probability of success?

[no response]

cruiser: I use stockcharts.com for chart scans sometimes. I often see a bar with O>h1 and O<C [initially specified the reverse; corrected.] and C> H1. When it is at the top of a trend, it has a huge success rate in marking the end of an uptrend. Does this candle have a name?

Candlestick1: Sounds like a Dark Cloud Cover

cruiser: It is great in stockcharts because the bar is a different color. Thanks

McDermojo: Was TSA on Friday a Doji or a Hanging Man?

Candlestick1: TSA looks more like a spinning top, a derivative of the Doji. Would be looking for selling, or selling on a lower open.

marlin: Is LOW a Doji? and about to reverse if confirmed?

Candlestick1: LOW: Yes, a Doji. The stochastics still heading up. This tells me to sell on a lower open or expect a day or two upside before the trend turns.

BillC: The hammer on LLL Friday w/ 50% retracement, support @ 20 & 40 mas. At what point would you consider this a buy? Just a higher open?

Candlestick1: LLL: The stochastics tell me we may have another day or two before the trend turns up. However, a positive open on Monday would have me buying.

McDermojo: You mentioned NWRE from Friday. What does its large gapped down closed candle tell you? Without even looking at the volume or support?

Candlestick1: The dark candle tells me the selling is not finished. Would start watching in a week or so to see if a buy signal appears. Then it would be a six to 16 week trade, to where it comes back up to the $12 range

Showing WBSN chart:

ilovemusic: Please discuss stategies for determining when a candle pattern has failed and give an example.

[no response]

Candlestick1: If a buy signal is formed by a large white candle, then common sense says if it closes below where that white candle started, then the sellers have taken over again. Get out.

JerryA: IBM, like QQQ, had an island reversal with a gap up, but the next candle appears now to have been an evening star, with Friday gapping up and falling hard. When was (or will) the gap up be negated?

Candlestick1: IBM, when the gap gets filled, I would project a doji type day on Monday with a slow upmove after that.

breck: I highly recommend reading his [Candlestick1’s] book and strongly recommend reading it more than once.

isay: Do you plan a 2nd edition of your book?

Candlestick1: It is just being started: High Profit Candlestick Formations

hotto: We will all be waiting for the new book

kellam: Was doji at base of trend for RGLD still a valid signal

Candlestick1 [showing RGLD chart, current]: RGLD, which doji?

kellam left

TraderDye: NPSP has a Dark Cloud but the stoch is not in overbought or oversold area. Could you comment on this?

Candlestick1: [showing NPSP]: NPSP had a dark cloud pattern on Friday, but the stoch are not in the overbought area. This is probably a profit taking day. If it opens weak and shows further weakness on Monday, sell. But I expect it wil either doji or open higher and head back up on Monday.

Waterbugg: What are your thoughts on SURE?

Candlestick1: SURE stochastics tell me to look for a buy signal within the next 2 or 3 days.

Candlestick1: Candlestick trading Hedge fund should be in place within 30 days

Jireh: Thank you very much for taking time to review your experience with me. Iam one who has lost dearly in this market over the past 3 years. I hope to do a better job with it in the future. Being able to sit in this time will help.

Gdp: He’s a slicker wicker picker

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