1. Profitable Candlestick patterns
Kermit Prather
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

2. Financial Seminar at Sea
CRUISE to the Panama Canal on CARNIVAL LIBERTY
Set sail April 12, 2008 for 8 glorious days!
8-Day Western Caribbean 
Ports of Call Include:
Port Everglades, Costa Maya,
Puerto Limon, Colon
Inside Stateroom - $687 p/p   
Oceanview Stateroom - $807 p/p 
Balcony Stateroom - $1057 p/p 
BOOK by October 29, 2007
You will learn to:
Build your trading plan
Manage open trades
Find trade candidates
When to Exit the trade 
When to Enter the trade
Analyze the results
Plus, the Trading Strategies to do all of the above
Adjust your Trading strategy to market conditions
Seminar fee is $795
We had an “Early Bird” special of $495 that Expired Oct 29th
IF you sign up today or within 7 days we’ll honor the $495
Use Promo code FTL110407, good until 11/12/07
or call Kermit
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

3. Topics and Patterns for Discussion
Basics of Candlesticks 
Major Bearish patterns
Major Bullish patterns
How to improve probabilities and profitability
Recent examples for each candlestick pattern
Where to find more information on candlesticks
Seminar at Sea special pricing for attendees only
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

4. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Candlestick Basics
Japanese Rice Traders created them over 400 years ago
Steve Nison is credited with introducing them into the U S markets
Gregory Morris and Stephen Bigalow are the other 2 major candlestick guru’s
There are over 100 Candlestick patterns
Candlesticks show investor sentiment more visual than OHLC bars
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

5. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bearish Candle
Sometimes referred to as a Black Candle
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

6. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bullish Candle
Sometimes referred to as a White Candle
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

7. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Indecisive Candles
Doji at the top should never be ignored
The smaller the body the more indecision
Doji body is very small 10% of daily range
Dragon-Fly Tombstone Long-legged
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

8. Indecisive Candles (cont)
Spinning-Top
No one won the battle of the Bulls and Bears
Body is less than 1/3rd of the candle range H – L
The tails are longer than the body
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

9. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Candlestick Web Sites
- Steve Bigalow
- Litwit.com
- Tom Bulkowski
- John Murphy’s
for TC2007users
Scans for candlestick patterns and more
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

10. Bullish Candlestick Patterns
Engulfing
Morning Star
Hammer
Three White Soldiers
Kicking
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

11. Bullish Engulfing Definition
Bullish Reversal 63% of the time
How to Identify it
Candle 1 is a bearish candle
Candle 2 completely engulfs the body of the candle 1
Stock in a downtrend or consolidating
Pattern suggests downtrend has lost momentum and the bulls may be gaining strength
Engulfing pattern is also the first two candles of the Three Outside patterns.
Confirmation is suggested
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

12. Bullish Engulfing- bad one
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

13. Bullish Engulfing- bad two
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

14. Bullish Engulfing – good one
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

15. Bullish Engulfing – good two
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

16. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Morning Star
Bullish Reversal 78% of the time
How to Identify it
First candle is a long black candle
Second candle gaps down and trades within a small range and closes at or near its open.
The third candle is a white candle
Stock has in a downtrend or consolidating
Pattern suggests the trading sentiment has changed and trend reversal is a high probability
No confirmation is required or suggested
Note:
The second candle can be a Doji or spinning top
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

17. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Morning Star - good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

18. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Morning Star - bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

19. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Hammer
Bullish Reversal 60% of the time
How to Identify it
Single candle pattern
Candle can be bullish or bearish
Signal considered stronger if candle is bullish
Candle body is less than 1/3 of the range H – L
Stock is in a downtrend
Long tail implies sharp sell-off after open but the bulls rallied and won the battle
suggest more buying to come
Requires confirmation
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

20. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Three White Soldiers
Bullish Reversal 82% of the time
How to Identify it
Three white candles occur, each with a close above the previous candle
Each candle opens within the body of the previous candle
Each candle closes near or at its high
Stock is in a downtrend
Pattern suggests the market has been selling of for too long, and buyers are beginning to come back into it
No confirmation is required or suggested
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

21. Three White Soldiers - good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

22. Three White Soldiers - bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

23. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bullish Kicker
Bullish Reversal 53% of the time
How to Identify it
The first candle’s open and the second candle’s open are the same.
The price movement is in opposite directions from the opening price.
The trend has no relevance in a Kicker situation.
The signal is usually formed by surprise news before or after market hours.
The price never retraces into the previous candle's trading range.
No confirmation is required or suggested
The first day is a Black Marubozu day
The second day is a White Marubozu day that gaps upward
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

24. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bullish Kicker - good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

25. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bullish Kicker - bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

26. Stockfetcher.com Bullish Scans
Bullish Engulfing
Bullish Morning Doji Star
Hammer
Bullish Three White Soldiers
Bullish Kicking
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

27. Bearish Candlestick Patterns
Engulfing
Evening Star
Hanging Man
Three Black Crows
Kicking
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

28. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bearish Engulfing
Bearish Reversal 79% of the time
How to Identify it
First candle is a white candle
Second candle is Bearish and its body completely “Engulfs” the first candle’s candle body
Stock has been in an uptrend
Pattern suggests the bears have taken control and the trend is about to reverse.
Confirmation is suggested
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

29. Bearish Engulfing - Bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

30. Bearish Engulfing - Good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

31. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Evening Star
Bearish Reversal 72% of the time
How to Identify it
First candle is a long white candle
Second candle trades within a small range and closes at or near its open.
The third candle is a black candle
Stock is in an uptrend
Pattern suggests the trading sentiment has changed and trend reversal is high probability
No confirmation is required or suggested
Note:
The second candle can be a Doji or spinning top
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

32. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Evening Star
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

33. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Evening Star
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

34. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Hanging Man
Bearish Reversal 59% of the time
How to Identify it
Single candle pattern
Candle can be bullish or bearish
Signal considered stronger if candle bearish
Candle body is less than 1/3 of the range H – L
Stock is in an uptrend
Long tail implies sharp sell-off after open and suggest more selling to come
Requires confirmation
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

35. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Three Black Crows
Bearish Reversal 78% of the time
How to Identify it
Three black candles occur, each with a close below the previous candle
Each candle opens within the body of the previous candle
Each candle closes near or at its lows
Stock is in an uptrend
Pattern suggests the market has been at a high price for too long, and investors are beginning to compensate for it.
No confirmation is required or suggested
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

36. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Three Black Crows - Bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

37. Three Black Crows - Good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

38. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bearish Kicker
Bearish Reversal 54% of the time
How to Identify it
The first candle’s open and the second candle’s open are the same.
The price movement is in opposite directions from the opening price.
The trend has no relevance in a Kicker situation.
The signal is usually formed by surprise news before or after market hours.
The price never retraces into the previous candle's trading range.
No confirmation is required or suggested
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

39. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bearish Kicker - Bad
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

40. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Bearish Kicker -Good
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

41. Stockfetcher.com Bearish Scans
Bearish Engulfing
Bearish Evening Doji Star
Hanging Man
Bearish Three Black Crows
Bearish Kicking
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

42. Tom Bulkowski’s www.thepatternsite.com
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

43. Candlesticks Statistics – where to find
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

44. Candlesticks Statistics – cont.
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

45. Candlesticks Statistics – cont.
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

46. Candlesticks Statistics – cont.
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

47. How to enhance probabilities
Visually observe the chart for proper trend
Up-trend Moving Averages align top-down 20, 40, 50
Downtrend from top-down 50, 40 ,20
Trendline
Linear regression slope
Pattern occurs at or near a major MA
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

48. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Use Efficiency Rating
Van Tharp uses an efficiency rating created from price change during 4 time periods
Pick any 4 periods such 20, 45, 90, & 180
TC2007 Formula using daily range
(((C – C180) / (AVGH180 – AVGL180)) +
((C – C90) / (AVGH90 – AVGL90)) +
((C – C45) / (AVGH45 – AVGL45)) +
((C – C20) / (AVGH20 – AVGL20))) / 4
Rating > + 7 are in an uptrend while < -7 in a downtrend
Tharp uses an ATR but daily range works as well
Stockfetcher results
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

49. How to enhance profitability
Use Overbought / Oversold indicators
Stochastics or crossover
Wilder’s RSI 5 or 14
Relative Strength
Comparison to its index
Use stocks that have made an extended move
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

50. Candlestick Books worth reading
Stephen
Profitable Candlestick Trading
High Profit Candlestick Patterns
Steve
The Candlestick Course
Beyond Candlesticks
Greg
Candlestick Charting Explained
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

51. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Books and more Books
Author
Title
Van Tharp
Trade Your Way To Financial Freedom
      Alexander Elder
Trading For A Living
Come Into My Trading Room
      Benjamin Graham
The Intelligent Investor
      Jack Schwager
Market Wizards: Interviews With Top Traders
      John Murphy
Technical Analysis of the Financial Markets
The Visual Investor
      Mark Douglas
The Disciplined Trader: Developing Winning Attitudes
      Martin Pring
Introduction to Technical Analysis
Breaking the Black Box
      Steve Achelis
Technical Analysis from A to Z
      Thomas Bulkowski
Chart Patterns
J. Welles Wilder
New Concepts in Technical Trading Systems – Most reference book in all TA
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

52. Copyright 2007, TradingOurWay, Prepared by Kermit Prather
Seminars
Stephen Bigalow – none better
David
Kermit
Copyright 2007, TradingOurWay, Prepared by Kermit Prather

53. Financial Seminar at Sea
CRUISE to the Panama Canal on CARNIVAL LIBERTY
Set sail April 12, 2008 for 8 glorious days!
8-Day Western Caribbean 
Ports of Call Include:
Port Everglades, Costa Maya,
Puerto Limon, Colon
Inside Stateroom - $687 p/p   
Oceanview Stateroom - $807 p/p 
Balcony Stateroom - $1057 p/p 
BOOK by October 29, 2007
You will learn to:
Build your trading plan
Manage open trades
Find trade candidates
When to Exit the trade 
When to Enter the trade
Analyze the results
Plus, the Trading Strategies to do all of the above
Adjust your Trading strategy to market conditions
Seminar fee is $795
We had an “Early Bird” special of $495 that Expired Oct 29th
IF you sign up today or within 7 days we’ll honor the $495
Use Promo code FTL110407, good until 11/12/07
or call Kermit
Copyright 2007, TradingOurWay, Prepared by Kermit Prather