basic candlesticks - uob-kay hian
TRANSCRIPT
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Basic Candlesticks
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You may from time to time be provided with marketing material, investment &
financial related information and reports, including but not limited to research
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
any particular person who may receive the information, report or analysis
(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 analysing 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 toidentify patterns that can suggest future activity.
▪ Technical analysts believe that the historical performance ofstocks and markets are indications of future performance.
What is Technical Analysis?
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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.
What is Technical Analysis?
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▪ Market Action Discounts Everything
▪ Prices move in Trends
▪ History tends to repeat itself
What is Technical Analysis?
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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.
What is Technical Analysis?
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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
What is Technical Analysis?
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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
What is Technical Analysis?
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Uptrend has a pattern of rising
peaks and troughs
What is Technical Analysis?
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Downtrend has a pattern of
lower peaks and troughs
What is Technical Analysis?
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Sideways has a pattern of
horizontal peaks and troughs
What is Technical Analysis?
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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”
What is Technical Analysis?
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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 easily interpreted and analysed
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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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22Rising Window
Gap
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23Rising Window
• 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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24Rising Window
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25Rising Window
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26Falling Window
Gap
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27Falling Window
• 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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28Falling Window
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29Falling Window
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30Doji
Price: Close = Open
High
Low
Close/Open
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31Doji
• Neutral pattern
• No real body
• Indecision signal
• Requires prior trend and future confirmation to determine
type of signal
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32Doji
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33Doji
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34Spinning Top
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35Spinning 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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36Spinning Top
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37Spinning Top
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38Spinning Top
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39Doji 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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40Umbrella Group or “karakasa”
• Definition: small real body (open, close range small)
• Shadows > 2 times the 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 patterns
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41Hammer
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42Hammer
• Bullish reversal pattern
• Single candle with long lower shadow and small real body
• Forms after a decline
• Colour of real body is not important
• Length of shadow must be greater than 2x the real body
• Confirmation is required
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43Hammer
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44Hammer
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45Hammer
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46Hanging Man
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47Hanging Man
• Bearish reversal pattern
• Single candle with long lower shadow and small real body
• Forms after an advance
• Colour of real body is not important
• Length of shadow must be greater than 2x the real body
• Confirmation is required
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48Hanging Man
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49Inverted Hammer
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50Inverted Hammer
• Bullish reversal pattern
• Single candle with long upper shadow and small real body
• Forms after a decline
• Colour of real body is not important
• Length of shadow must be greater than 2x the real body
• Confirmation is required
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51Inverted Hammer
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52Shooting Star
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53Shooting Star
• Bearish reversal pattern
• Single candle with long upper shadow and small real body
• Forms after an advance
• Colour of real body is not important
• Length of shadow must be greater than 2x the real body
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54Shooting Star
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55Shooting Star
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56Case Study
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57Case Study
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58Case Study
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59Quiz
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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60Quiz
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
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