ta seminar - basic candlesticks (25 apr 19)

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Basic Candlesticks

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reports and market or securities specific analysis. Please note that the

information is provided for you by way of information only. All of the

information, report and analysis were and should be taken as having been

prepared for the purpose of general circulation and that none were made with

regard to any specific investment objective, financial situation or the needs of

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(including yourself). Any recommendation or advice that may be expressed in

or inferred from such information, reports or analysis therefore does not take

into account and may not be suitable for your investment objectives, financial

situation and particular needs.

Disclaimer

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1. What is Technical Analysis?

2. History of Candlesticks

3. How to Read Candlesticks

4. Candlestick patterns

Contents

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What is Technical Analysis?

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▪ A method of evaluating securities by analyzing statisticsgenerated by market activity. (E.g. past prices and volume)

▪ Technical analysts do not attempt to measure a security'sintrinsic value, but instead use charts and other tools to identifypatterns that can suggest future activity.

▪ Technical analysts believe that the historical performance ofstocks and markets are indications of future performance.


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It is crucial to keep in mind that Technical

Analysis is not an exact science.

Rather, Technical Analysis deals with

probability distributions.


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▪ Market Action Discounts Everything

▪ Prices move in Trends

▪ History tends to repeat itself


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1. Market Action Discounts Everything

▪ Cornerstone of Technical Analysis

▪ The technical analyst believes that anything can possibly

affect the price and is actually reflected in the price of that

market

▪ Anything can be political, psychological or natural

disasters, etc.


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2. Prices move in Trends

▪ The concept of Trend is essential to Technical Analysis

▪ Believe that market prices do exhibit Trends

▪ Purpose of charting price action is to identify Trends


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3 Basic Trends of the Market

Uptrend Downtrend Sideways

▪ Uptrend has a pattern of rising peaks and troughs

▪ Downtrend has a pattern of lower peaks and troughs

▪ Sideways has a pattern of horizontal peaks and troughs


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Uptrend has a pattern of rising

peaks and troughs


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Downtrend has a pattern of

lower peaks and troughs


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Sideways has a pattern of

horizontal peaks and troughs


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3. History tends to repeat itself

▪ The study of Human psychology

▪ Chart patterns reflect Bullish / Bearish psychology of the

market

▪ Key to understanding the future lies in the study of the

past or that “The future is just a repetition of the past”


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Candlesticks

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• Candlesticks are a type of charting technique

• Other techniques include Bar Charts and Line Charts

• Candlestick charts are used in Technical Analysis to

deduce trends and predict price movements

Introduction

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17Advantage of Candlestick Chart

• Easy to understand – offer a much more appealing chart

• Information displayed is more easily interpreted and

analyzed

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18History of Candlesticks

• Developed by the Japanese for rice trading in 16th

century

• Popularised by Steve Nison after his publication of

“Japanese Candlestick Charting Techniques” in 1991

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19How to Read Candlesticks

High

Close

Low

Hollow Body

Lower Shadow

Upper Shadow

Open

Price: Close above Open

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20How to Read Candlesticks

Price: Close below Open

High

Open

Low

Filled Body

Close

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21Candlestick Chart

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22Gap Up

Gap

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23Gap Up

• Bullish sign

• Opens above Previous Period’s High

• Remains above Previous Period’s High for Entire Period

• Closes above Previous High

Gap

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24Gap Up

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25Gap Down

Gap

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26Gap Down

• Bearish sign

• Opens below Previous Period’s Low

• Remains below Previous Period’s Low for Entire Period

• Closes below Previous Low

Gap

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27Gap Down

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28Doji

Price: Close = Open

High

Low

Close/Open

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29Doji

• Neutral pattern

• No real body

• Indecision signal

• Requires prior trend and future confirmation to determine

type of signal

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30Doji

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31Spinning Top

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32Spinning Top

• Signal indecision

• Small bodies

• Upper and lower shadows exceed length of the body

• Upper and lower shadows of approximately equal length

• Require confirmation

Length of Body

Lower Shadow

Upper Shadow

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33Spinning Top

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34Spinning Top

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35Doji and Spinning Top

Similarities

• Represent indecision

• Warn of reversal after strong move

• Rely on confirmation

Differences

• Doji has no body

• Spinning top always has long legs and small body

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36Umbrella Group or “karakasa”

• Definition: small real body (open, close range small)

• Shadows > 2 times length of real body

• Colour is not important

• Location is important. Their names are given based on location

• There are only 4 patterns in umbrella group

• There are single candlestick reversal pattern

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37Hammer

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38Hammer

• Bullish reversal pattern

• Single candle with long lower shadow and small real body

• Forms after a decline

• Color of real body is not important

• Length of shadow must be greater than 2x real body

• Confirmation is required

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39Hammer

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40Hammer

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41Hanging Man

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42Hanging Man

• Bearish reversal pattern

• Single candle with long lower shadow and small real body

• Forms after an advance




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43Hanging Man

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44Inverted Hammer

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45Inverted Hammer

• Bullish reversal pattern

• Single candle with long upper shadow and small real body

• Forms after a decline




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46Inverted Hammer

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47Shooting Star

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48Shooting Star

• Bearish reversal pattern

• Single candle with long upper shadow and small real body

• Forms after an advance



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49Shooting Star

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50Shooting Star

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51Quiz

What is the candlestick shown on the right?

A.Shooting Star

B.Morning Star

C.Inverted Hammer

D.Hammer✔ (forms after downtrend)

✔ (forms after uptrend)

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52Quiz

What is the candlestick shown on the right?

A.Shooting Star

B.Hanging Man

C.Inverted Hammer

D.Hammer

✔ (forms after uptrend)

✔ (forms after downtrend)

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Thank you

ta seminar - basic candlesticks (25 apr 19)

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