Japanese Candlesticks Ron William Technical Analyst Email: rwilliam@investorsintelligence.com investorsintelligence.com

Brief History Market timing, charting, behavioural finance & quantitative analysis. Methodology dates back to 1600s, originally used by Japanese rice farmers to monitor and forecast crop prices. Famous trader named Homma (aware of supply/demand links), realised the markets were strongly influenced by emotions. Introduced to the west in 1990 by Steve Nison, a leading expert in candlestick analysis.

Constructing the Candle Line Bullish Candle White Real Body Bearish Candle Black Real Body High High Upper Shadow Close Open Real Body Open Close Lower Shadow Low Low

The Real Body is the essence of market psychology

Basic Candles Long Day Doji Spinning Top High Wave Strong buy/sell Midpoint used as support/resistance Open and close are narrow/same Market is tired 1. Small real body 2. Colour not imp. Prior trend weak 1. Small real body 2. Colour not imp. 3. Long shadows Indicates confusion

Powerful Candles

Doji Criteria: Open and close are narrow or the same Psychology: Market is “tired”

Doji Silver (Weekly Chart) Doji hints market is “tired” 5 3 4 2 1

Doji in box range USD/ZAR (Daily Chart) Series of doji within box range merely sets tone

Single Line Hammer Shooting Star 1. Lower Shadow 2X 1. Upper Shadow 2X length of Real Body 2. RB at upper end, colour not important 3. No/very small upper shadow 4. Confirmed with a strong bullish day 1. Upper Shadow 2X length of Real Body 2. RB at lower end, colour not important 3. No/very small lower shadow 4. Confirmed with a strong bearish day Hammering a base Trouble overhead

Hammer GBP/USD (Daily Chart) Support

Shooting Star Wheat (Weekly Chart) Risk? Selling on close implies risking the pattern high Sell? Preferred Sell

Dual Line Engulfing Dark Cloud Cover Piercing Line 1. Downtrend evident 2. Session opens < prior low 3. Bullish RB closes >50% into bearish RB 1. Large RB wraps around small RB 2. Opposite colours 3. Up/Down trend 1. Uptrend evident 2. Session opens > prior high 3. Bearish RB closes > 50% into bullish RB Arresting control Sentiment reversal Sentiment reversal

Bullish Engulfing Kuwait Stk Mkt (Weekly Chart)

Dark Cloud Cover Palladium (Weekly Chart) Midpoint Sell

Three Line Morning Star Evening Star 3 White Soldiers 3 Black Crows 1. Downtrend evident 2. Bearish session is followed by indecision. 3. Bulls close > 50% into prior Bear RB 1. Uptrend evident 2. Bullish session is followed by indecision. 3. Bears close > 50% into prior Bull RB 1. Three bullish RB’s, all of similar size 2. Prior trend is down 3. Each session opens with recent RB & closes near high 1. Three bearish RB’s, all of similar size 2. Prior trend is up 3. Each session opens with recent RB & closes near lows Upside reversal Downside reversal Uptrend Downtrend

Western charting Optimises and confirms Price targets Support and Resistance Trend-lines Price Patterns Moving Averages Oscillators Elliott Wave

Moving Averages Gold (Weekly Chart) 70-week average Hammer Piercing Line High-wave 70-week average Piercing Line

3 White Soldiers (variant) Price Patterns Soybean (Daily Chart) 3 White Soldiers Shooting Star Shooting Star 3 White Soldiers Morning Star Bullish Engulfing 3 White Soldiers (variant)

Confluence EUR/USD (Daily Chart) 61.8% 50% Measured Objective 38.2%

Relative Strength Index CRB (Weekly Chart)

Bollinger Bands Oil (Daily Chart) Bearish Engulfing Hammer Hammer Dark Cloud Cover Dark Cloud Cover Bullish Engulfing High-Wave Hammer

Elliott Wave (3) Gold (Daily Chart) (4)? (1) (2)

Corrective Wave (4)? Gold (Weekly Chart) (3) (4)? Dark Cloud Cover Hanging Man (4)? Piercing Line Hammer

Trading Rules Wait for the session’s close to confirm DO NOT use candles in isolation Always consider Risk/Reward ratios before placing a trade with a candle signal Candles DO NOT offer price targets Remember the importance of stops 1

Candle Analysis Unrivaled in Gauging Market Psychology Human Emotion Drives the Market Candle Analysis Unrivaled in Gauging Market Psychology Presentation slides designed by Ron William