Skip to main content

How candelsticks charts predictions works

 

 

In the daily epic struggle between buyers and sellers, technical analysis shows who is winning. If buyers are in control then prices go up, if sellers are in control then prices go down.

Everyday a battle is played out between buyers and sellers. Buyers drive up the prices and sellers drive down the price. A perfect example of this is at the seafood markets. Normally prawns sell for around $25 per kilo. At Christmas time, prawns sell for about double, at around $50 per kilo. Why the big difference?

In any market, buyers drive up the price and sellers drive down the price. At Christmas time because there is a large number of buyers, they drive up the price. It's the same as in the sharemarket- buyers drive up share prices and sellers drive them down. Candlesticks is a way of looking at the battle between buyers and sellers to see whether share prices are being driven up or down.

Candlesticks are a short term trading tool which is usually used to try and figure out whether buyers or sellers have the power in the short term (5-7 days)

A candlestick needs four pieces of information: the opening price and closing price and then the highest and the lowest price reached for the period.

The rectangle part of the candlestick is called the body and represents the difference between the opening and closing price. If the opening price is lower than the closing price than the body is white or green. If the opening prices is higher than the closing price than the body is black or red.

The long lines above and below the body represents the trading range. The top of the line is the highest price traded for the period. The bottom of the line is the lowest price traded.

If buyers are in control then the share prices usually goes up. If sellers are in control then the share price usually goes down.

They say a rising tide lifts all ships and so can a bull market. Technical Analysis or charting can help determine if we are in a rising market or a falling one. After all, around 3 out of 4 stocks follow the general market direction.

In this first bar, you can see that the price opened near the low and then ended near the high so the buyers were in control. Its body is white or green. It's quite a bullish signal going into the next day of trading with trading likely to start with the buyers in control and prices moving up.

Conversely, if the day's trading starts near the top and ends near the bottom, it means that the sellers are in control, driving the share price downwards. The body of the candlestick is black or red. It's a bearish signal indicating that sellers are in control and the next day of trading is likely to start with sellers in control and prices moving down.

The middle ground is balance, where no one wins the battle. Usually this signals consolidation and then potentially a change in direction.

It's all about the body

The body can let us about the strength of the move. The longer the body then the stronger and more intense the move was. A long white or green body signals strong buying power which will most likely see the price continue to move upwards. A long black or red body signals strong selling power with price most likely moving downwards.

Short bodies on the other hand, signal balance in the buyers and sellers. This signals low volatility which means that the price may be looking to break out.

Buy signals

 

Long Lower Shadow - the lower line must be the same or bigger than the body. The longer the lower line then the more reliable the signal.

Marubozu White - usually a signal that shows a continuation of an uptrend

Sell signals

Long upper shadow - the upper line must be the same or bigger than the body size. In fact the longer the upper line then the more reliable the signal.

Marubozu Black - usually a signal that shows a continuation of a downtrend.

There are many, many patterns of candlesticks which can give us insight into where price may be headed. I hope that this introduction has sparked enough interest to continue on and learn about candlestick patterns

Information from Julia lee thanks to  >>  the Hubb website.

Financial seminars  / hapenings 2008 Perth WA

Topic:  2008: The Year Ahead, Chris McGrath - Australian Stockbroking & Advisory Services Ltd
When: Tuesday 5 February
Where: State Library Theatre, Alexander Library Building. Entry is via either of the two main entrances - Perth Cultural Centre entrance in the James Street Pedestrian Mall or Francis Street.
Time:  12 noon - 1pm
Cost: $5 (incl. GST). Tickets can be purchased at the door 30 minutes prior to the presentation.

Chris will review 2007 and outline the likely sectors and stocks to watch in 2008.  He will also cover the broader Australian and overseas economic outlook and how this will impact the sharemarket over the next 12 months.

Chris has had 9 years experience as an Investment Manager and is currently State Manager for Australian Stock Broking and Advisory Services (ASANDAS).  His previous experience was in the fields of management consulting and management training. He has been conducting Stocks to Watch talks and lectures for the last 6 years.

We recommend arriving early to avoid disappointment.  No bookings taken.

Delivering Shareholder Wealth by Mining & Exploration Success, Chris Bonwick of Independence Group NL
View presentation slides (PDF 2MB), Tuesday 13 November, 2007

Beyond Greed & Fear - The real psychology of Investors, Gary Norden of Marketwise Traders
View presentation slides (PDF 252KB), Tuesday 2 October, 2007

Stocks to Watch, Chris McGrath of ASANDAS
View presentation slides (PDF 166KB), Tuesday 5 June, 2007

A Super Future before us, Aaron Ross-Connolly of ABN AMRO Morgans
View presentation slides (PDF 177KB), Tuesday 15 May, 2007

After Tax Returns, George Vassos of Vanguard Investments
View presentation slides (PDF 234KB), Tuesday 6 March, 2007

Economic Overview 2007, Kate Hillyar of Credit Suisse Asset Management
View presentation slides (PDF 487KB), Tuesday 6th February, 2007

 

What's new

Non-Voting Ordinary Shares
ASX has released a public consultation paper (PDF 166 KB) requesting feedback on a proposal for ASX to amend its listing rules to allow quotation of non-voting ordinary shares, subject to certain safeguards. ASX invites submissions by Friday 7 March 2008.

2008 ASX Omnibus Listing Rule Amendments
ASX has released details of proposed omnibus listing rule amendments (PDF 260KB). ASX invites comments on any of the proposed listing rule amendments by Friday 15 February 2008.

ASX Submission to ASIC Consultation Paper 86: Competition for Market Services
On Friday 17 August 2007, ASX forwarded a submission to ASIC (PDF 291KB) in response to its Consultation Paper 86: Competition for Market Services - trading in listed securities and related data. ASX provided another paper of supporting analysis on 27 September 2007.

You can now trade FX on ASX, as well as Indices, Gold and ASX's top 50 companies

ASX CFD logo Reflecting the successful launch, ASX has increased the range of ASX CFDs (PDF 82KB). Want exposure to the US Dollar, the Yen or even the Dow Jones Industrial Average index? With ASX CFDs it's now as easy as buying shares on ASX. Explore the wealth of information on our website.

Upcoming events (More upcoming events)

February

2008: the year ahead
Perth

Stocks to watch
Melbourne

Taking control of your super
Brisbane

A preview of 2008
Sydney

The art of selecting superior stocks
Adelaide

Upcoming floats (More upcoming floats)

[Your browser or user agent does not support frames or is currently configured not to display frames. View all upcoming floats.]

New listings (More recent listings)

[Your browser or user agent does not support frames or is currently configured not to display frames. View all recent listings.]

How will a Labor government affect the sharemarket?

Is the Labor Government good or bad news for the Australian sharemarket, questions the managing editor of CompareShares.com.au Toni Case.

How will a Labor government affect the sharemarket?

Why are candlesticks important?

Julia Lee explains how to use candlesticks to predict short term gains.

Why are candlesticks important?

 

Popular posts from this blog

Best Australian stock forums online ( finance forums)

Many traders and investors use forums to share ideas, learn from the more experienced, or simply to stave off boredom during long hours at the computer. Here we list the known universe of forums, complete with costs, member numbers, extra benefits and popular forum topics. Please post a message on Your 2 Cents if your favourite forum isn't listed here, or if you feel that there's more to add about the day-to-day goings on in your online community.Forum
Cost
Stock comps
Forum areas
Comments
AussieStockForums.comFreeASX by share code, General, Beginners, Derivatives, Commodities, International, Strategies/SystemsEasy to use, independent forum. Aussie Stock Forums has a group of very active and knowledgeable traders. Private messaging available. Australian forum.
Chimes in ExileFreeASX stocks, fundamental analysis, technical analysis, commodities, economics, investment tools The forum has a small group of regular contributors that form a genuine community of investor…

The diggers and dealers forum meet 2011

The diggers and dealers forum has just begun August 1. Its a three day annual event happening every year  at the WA country town of kalgoorlie.2011 Diggers & Dealers forumBig name brokers  keenly watching the event will be MacquarieDeutsche BankBell PotterGoldman SachsRBS MorgansEvans & PartnersHartleysBlack Swan Euroz.Well most other websites will give you the  finer details of the annual meet and greet that happens at kalgoorlie , so we will just stick with the bare minimum of details  and focus on the more enjoyable bits  of information that the dealers require to strike a good deal while in town.Bare detailsWebsite : Diggers & DealersEvents : Program and scheduleWatering holes and entertainment at Diggers and dealers forumPubs , clubs  and skimpy (barmaids) culture in kalgoorlie . There are about 25 pubs in Kalgoorlie-Boulder area and for a city that stretches just 67sq km the number of pubs makes for  a good choice on drinking holesand entertainmentExchange Hotel ( Pa…

List of Australian blue chip stocks

Australian shares gained 0.6 percent on Wednesday led by blue chip miners and financials on strong resource price


The biggest Blur chip stocks traded on the ASX, in terms of their market capitalisation, include:
BHP BillitonCommonwealth Bank of AustraliaTelstra CorporationRio TintoNational Australia BankAustralia and New Zealand Banking GroupRio tintoWestpac
The only stock to do worse than the S&P/ASX 200 is Harvey Norman Holdings Ltd [ASX: HVN]. Even so, it’s a better-than-the-bank 8.3% gain. The others have done much better: Qantas [ASX: QAN] up 36.1%; JB Hi-Fi [ASX: JBH] up 20.5%; Toll Holdings [ASX: TOL] up 25.3%; and Myer Holdings [ASX: MYR] up 37.1%. The benchmark S&P/ASX 200 index rose 27.1 points to trade at 4,977.3 by 2310 GMT. It fell 0.8 percent on Tuesday, its lowest close since February 7.