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Advanced Candlestick

Charting Techniques:
Secrets to Becoming a
Samurai Trader

He who is well
prepared has won
half the battle

Slide 3

New refinements and enhancements for high success


trading with candle charts
See when to ignore a candle signal
Special section on on intraday charts
Uncover the one rule every candlestick trader ignores at
their own peril
The P.R.O.F.I.T.S methodology
Learn the six principles every candlestick trader must
know
Uncloak new uses for the most potent candle pattern - the
window
Effective money management concepts to maximize the
effectiveness of candle charts
Interactive practice sessions

3
3

Constructing the Candle Line

4
4

Candle or noses

5
5

Candles shine at Preserving Capital

A tall white candle pierces this resistance in early March.


For those who already are long this index, this was a green
light to remain long. But observe what unfolded the next
sessionthe doji. This doji line hinted the bulls had lost full
of the market (note: it does not mean that the bears has taken
control).

Warren Buffets Rules of


Money Management
Rule 1 Not to lose money
Rule 2 Dont forget rule 1
7

Nison Trading
Principle
Candlesticks do not give
price targets.

Gravestone Doji
This doji takes on extra significance
because it confirms a resistance level

Nison Trading
Principle
A candlestick line or pattern
requires two criteria:
The shape of the line or pattern
The preceding trend

10

Doji and Trend


Concept:
To use a northern doji as a
signal we need to have an
uptrend to reverse

11

Doji in a Box Range is


not a trading signal

Doji and trend


A doji in the middle
of a trading range has
no trend change
implications

Box Range

12

Doji

Northern and Southern Doji


A doji in an uptrend
is a Northern Doji

A doji in a
downtrend
is a
Southern
Doji

13

Southern Doji

14

Nison Trading
Principle
Candle signals must be
evaluated and acted upon
within the markets context

15

Doji in Context

Concept:
If a doji makes a new
high close for the move,
wait for bearish
confirmation with a close
under the dojis close

16

Need a
close
under
here to
turn
bearish

Doji in Context
Which of these
scenarios is a more
likely top reversal?

Scenario 1
17

Scenario 2

Doji, but New High Close

18

Doji, but New High close

19

Flexibility with Candles (and Confluence)

20

Doji
TJX

What makes doji 2


different than doji 1?

42.5

42.0

41.5

41.0

40.5

40.0

39.5

39.0

38.5

38.0

37.5

37.0
28

21

4
February

11

19

25

4
March

11

18

25

1
April

15

Trading Tactics
1) Name the two
reversal signals
at the arrows.
2) Would you use
these signals to
sell short?
Liquidate longs?
Why?
3) What is bearish
confirmation of
the reversal
signals?

22

Doji as Resistance

Criteria: Use the highest high of


those two sessions (top of upper
shadow) as resistance
Implication: Close over that area:
market is refreshed

23

Doji

The red arrows


show the bulls
have complete
control. The doji
session alters the
trend (note also
the spinning tops
in mid and late
June).

24

Small Real Body as a doji

25

Doji after tall white

26

Doji as Resistance

27

Trading Tactics - Doji


Analyze these doji in the context of what happened
before. Are any of these a more likely reversal and why?

A -1

28

B-2

C-3

Trading Tactics Doji (answer)


Analyze these doji in the context of what happened
before. Are any of these a more likely reversal and why?

A-1

Rally may
just be
starting

29

B-2

Market not
overextended

C-35

Resistance
confirmed by
doji

Doji Overview Analyze Each Doji in Context of Trend


HEIDRICK STRUGG

20.5
20.0
19.5
19.0
18.5

18.0
17.5
17.0

16.5
16.0
15.5
15.0

14.5
14.0
13.5

1
15

30

22

29

5
August

12

19

26

3
9
September

16

23

Shadows

Remember: location and size of the shadow should be considered


when analyzing the market psychology.
Implication: Bearish long upper shadow offsets rallying
strength. Bullish long lower shadows hints bears losing force.
31

Upper Shadows and slope of advance

32

The Tools of the West with the


Light of the Candles

Scenario
1

Scenario
2

33

Hammer
Criteria:
Small real body at, or near top, of range
Lower shadow at least 2x real body
Market in down trend
Implication: Groping for a bottom

black or white

34

Shooting Star
Criteria:
Small real body at, or near bottom, of range
Upper shadow at least 2x real body
Market in an up trend
Implication: Signaling Trouble Overhead

35

black or white

High Wave Candles

Criteria: very long shadows and lower


small real body - color not important
Implication: Trend is losing force
36

High Wave Candle

Whos in Charge?

Whos in Charge Now?

37

High Wave Candle


New High
Close,but??

38

Long Legged Doji Rickshaw


Man

Criteria: very long shadows and lower


small real body - color not important

39

Implication: Market has lost its sense


of direction

High-wave candle
RDY
The market is
at a new highbut the high
wave candle
shows the
bulls are not in
full control.

40

Engulfing Patterns
Bearish
Engulfing
Pattern

Criteria:
White real body wraps around
preceding black real body
Market in down trend
Implication: Market bottoming out

Criteria:
Black real body wraps around
preceding white real body
Market in up trend

41

Implication: Bulls have been


constrained

Bullish
Engulfing
Pattern

Bullish engulfing pattern as support


ORACLE

10.3
10.2
10.1

One of most powerful aspects of


the bullish engulfing pattern is
their use as support.

10.0
9.9
9.8
9.7
9.6
9.5
9.4
9.3
9.2
9.1
9.0
8.9
8.8
8.7
8.6
8.5
8.4
8.3
8.2
8.1
8.0
7.9
7.8
7.7
7.6
7.5
7.4

16

23

30

7
October

42

14

21

Bullish engulfing pattern


S&P Continuation

Note how
many black
candles the
white
candle
wrapped
around

43

Shooting
star

Bullish engulfing pattern as support

While the low of the bullish


engulfing pattern is support,
for those who are more eager
to buy you can use the center
of the tall white real body as
an entry point. Keep in the
mind the risk reward of the
trade.

44

Center tall
white

Bearish engulfing pattern as resistance

If the first candle


is a doji instead
of a white real
body it is still
viewed as a
bearish engulfing
pattern.

45

Bearish Engulfing Pattern compared to Western outside reversal

46

Relative Strength

On this day Dow


was down 150

47

Bullish Engulfing Pattern


Is this a
Bullish
Engulfing
Pattern ?

48

Engulfing pattern comparing size of real bodies


SIERRA WIRELESS
10.6
10.5
10.4
10.3
10.2
10.1
10.0
9.9
9.8
9.7
9.6
9.5
9.4
9.3
9.2
9.1
9.0
8.9
8.8

Consider the relative size of


the real bodies. Here they are
equal size, so reversal is less
likely. Final confirmation of
its failure comes with the close
under its support area.
1
April

49

15

22

8.7
8.6
8.5
8.4
8.3
8.2
8.1
8.0
7.9
29

6
May

Last Engulfing Pattern

Bullish
Engulfing
Pattern

Last
Engulfing
Pattern

50

Last Engulfing Pattern

51

Last Engulfing Pattern

52

Note: This is the same chart as slide 51

Last Engulfing Pattern

53

Dark Cloud Cover


Criteria:
Opens above prior high (or close)
Closes as long black real body
Close well into prior long white candle
Market moving north
Implication: Advance is exhausting
itself

54

Nison Trading
Principle
Not all candle signals should
be used to buy or sell. Always
consider the risk/reward
aspect of the trade.
55

Dark Cloud Cover and Risk/Reward

Pattern
Completed
Here

56

The Blended Candle Line

close 2

open 1

57

Blended candle real body = open


of the first session, close of the
last session. Blended candle
shadows = highest high and
lowest close of all sessions

The Blended Candle Line

58

The Checkmate Principle:


A series of tall white candles followed by
black candles (or small real bodies) near the
same resistance level reveals that the bulls
drive is being checkmated
A series of long black candles followed by
white candles (or small real bodies) near the
same support level reveals that the bears
drive is being checkmated
59

Bearish Checkmate
9

= strong session
9 = failure to sustain rally
This shows lack of bullish follow
through shows that each time this gets
in the 60-64 range.

60

Hammer as support

61

The Checkmate Principle

What
happened
after each
white
candle?
When there is a series of tall white candles
followed by black candles or small real bodies
near the same resistance level it reveals that the
bulls drive is being checkmated

62

Tweezers Tops and Bottom

Criteria:
First Candle is large real body
Second session same high and,
ideally, small real body

63

Implication: Prior trend doesnt


have a solid foundation

Tweezers Bottom

64

Tweezers tops

65

Tweezers top

66

Morning Star
Criteria:
Market in down trend
First candle long black
Second real body (spinning top,
black or white) doesnt overlap first
sessions real body
Third candle (white) closes deeply in
first black real body
Implication: Bulls are taking control

white or black
67

Morning Star

white or black
68

Morning Star variation

69

Evening Star
white or black
Criteria:
Market in an up trend
First candle is long white
Second real body (black or white
spinning top) doesnt overlap first
sessions real body
Third candle (black) closes deeply in
first white real body
Implication: Bears are taking control

70

3
1

Nison Trading
Principle
Candle signals must be
evaluated and acted
upon within the markets
context
71

Evening Star compared to Morning Star

Evening Star

Would you
buy here?

How about
here?

Morning Star

72

Evening Star and Risk/ Reward


HEIDRICK STRUGG
20.0
19.5

Evening Star
completed here. This
is likely a poor
risk/reward for a short
sale.

19.0
18.5

This doji
confirms
the
resistance
area set by
the evening
star and as
such may
offer a
better r/r.

18.0
17.5
17.0
16.5
16.0
15.5
15.0
14.5
14.0

24

73

1
July

15

22

29

5
August

12

19

26

3
9
September

16

Windows
Rising
Window

74

Falling
Window

Trading Tactics practice

1. What pattern is highlighted?


2. When would you sell short based on this pattern?

75

Trading Tactics practice

(answer)
Potential
selling
levels

Rising
windows
support

1. What pattern is highlighted? Bearish engulfing pattern


2. When would you sell short based on this pattern?
Because of the rising window we would not sell on the
completion of this pattern. As such we could sell on (a) the
resistance at the highs of the bearish engulfing
pattern, or (b) on a break under the windows support.

76

Breakaway Gaps

77

Breakaway Gap
PRECISION DRILL
39.0
38.5
38.0
37.5
37.0
36.5
36.0
35.5
35.0
34.5
34.0
33.5
33.0
32.5
32.0
31.5
31.0
30.5
30.0
1
April

78

15

22

29

6
May

13

20

27

Breakaway Gap

79

Breakaway gap
INTL GAME TECH

22

80

28

The stock not only breaks


support but does so with a
falling window. This increases
the potency of the windows
resistance. Note the shooting star
and bearish engulfing pattern on
the rebound
4
February

11

19

25

4
March

11

70.5
70.0
69.5
69.0
68.5
68.0
67.5
67.0
66.5
66.0
65.5
65.0
64.5
64.0
63.5
63.0
62.5
62.0
61.5
61.0
60.5
60.0
59.5
59.0
58.5
58.0
57.5
57.0
56.5
56.0
55.5
55.0
54.5
54.0
53.5
18

25

1
April

15

Breakaway Gap
MICROSOFT
70.0
69.5
69.0
68.5

Gapped under
support

68.0
67.5
67.0
66.5

Small
windows

66.0
65.5
65.0
64.5
64.0
63.5
63.0
62.5
62.0
61.5
61.0
60.5
60.0
59.5
59.0
58.5
58.0
57.5

31

7
2002

81

14

22

28

4
February

11

19

25

4
March

11

18

25

57.0

Breakaway Gap

82

Nison Trading
Principle

With windows size does


not matter.

83

Large and small windows

Large
window with
the bottom
of this
window as
pivotal
support

84

Small
window

Large Window

85

With windows size does not matter


NY CMNTY BANCP

31.5
31.0
30.5
30.0
29.5
29.0
28.5
28.0
27.5
27.0
26.5

High on July 26 was


27.09, low the next
session was 27.21

26.0
25.5
25.0
24.5
24.0
23.5

16

86

17

18

19

22

23

24

25

26

29

30

31

1
2
August

Small Window

87

More than three windows


Closed under the
top windows
support

We need to wait until the top


window is closed to confirm a
change in trend

88

Three Windows

89

Island Top and Bottom


Island Top

Island Bottom
90

Island Bottom

91

Island Top

92

Windows as Target
Daily
prices
for
1993

Once
under
$21 we
have to
go to
1993
for next
support

93

Rising
Window

Window as a target

target

Buy here

94

Rounding Tops/Bottoms

Fry Pan Bottom


95

Dumpling Top

Dumpling Top

96

Fry Pan Bottom

97

Midway (measuring) Gap

98

Midway Gap

99

High Price Gapping Play

100

High Price Gapping Play


99 CENTS STORES
14.4
14.3
14.2
14.1
14.0
13.9
13.8
13.7
13.6
13.5
13.4
13.3
13.2
13.1
13.0
12.9
12.8
12.7
12.6
12.5
12.4
12.3
12.2
12.1
12.0
11.9
11.8
11.7
11.6
11.5
11.4
11.3
11.2
11.1
11.0
10.9
10.8

Congestion
band

High price
gapping
play

15

22

29

6
July

101

13

20

Gapping Doji

102

Gapping Doji

103

Interactive Chart
1. What candle signals are at A and B?
2. What candle signals are at C and D?
3. Why did the rally stall at E and what was
the candle signal formed?
4. After the decline from E why did the
market find support near $18?

B
C

104

Interactive Chart - answers


1. What candle signals are at A and B?
Because of the trend neither are engulfing
patterns.
2. What candle signals are at C and D?
Bullish engulfing pattern and a bullish counterattack pattern
3. Why did the rally stall at E and what was
the candle signal formed? The falling window
opened in early August. A bearish engulfing
pattern
4. After the decline from E why did the
market find support near $18?- The small
rising window

Small rising
window

B
C

105

Record Sessions
Overbought / Oversold Indicator

9 record session highs


6
5
2
1

low for move


106

Record Session Highs


10

107

Record session highs

Start here

108

Three Advancing White Soldiers

109

Three White Soliders

Three advancing
soldiers

110

Three White Soliders

Advancing
three soldiers

111

Three Black Crows

112

Three Black Crows


PULTE CORP (44.8600, 45.6600, 43.7600, 43.9000, -0.95000)

50
49
48
47
46
45
44
43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25

113

25

2
July

16

23

30

6
August

13

20

27

4
10
September

24

Rising and Falling Three Methods

114

Rising Three

Falling Three

Rising Three Methods


PHARMACIA

47.0
46.5
46.0
45.5
45.0
44.5
44.0
43.5
43.0
42.5
42.0
41.5
41.0
40.5
40.0
39.5
39.0

19

115

20

21

22

25

26

27

28

1
4
March

11

12

13

14

15

18

19

20

21

22

25

26

27

28

1
Ap

Open below/above the Stomach

close

Below Middle White


116

Above Middle Black

Open below the stomach

117

Above the Stomach

118

Above the Stomach

119

Above the Stomach

120

Below the Stomach

121

Counter Attack Lines

close

close

Bearish
122

Bullish

Not Counter Attack Lines


Second session did not
open high enough

Both sessions were not


long real bodies
123

Bullish Counter Attack

124

Volume Counter Attack

125

Bullish Counter-attack

First sign of a turn


was bullish counterattack

126

Convergence of Clues- Counter Attack


Bearish counter
attack

doji

127

Bearish engulfing
pattern

Bearish Counter-attack
Counterattack also
confirming
resistance

Why does this candle hint


bears are not in complete
control in spite of the large
price drop? What
happened the next session?

128

The Phantom method

What was support


before this session?
129

Phantom method

130

Phantom

131

Phantom method wheres R1?

132

(slide 1 of 2)

Phantom method

133

(slide 2 of 2)

Using Candles in a Box Range

134

Box range
Do the bears or
bulls have the
greater
control?

135

Box Range

Do the bears or
bulls have the
greater
control?

136

Intraday Techniques
Flexibility reading candle signals
Combining intraday signals with longer
time frame support or resistance.
Harnessing intraday charts for signals
not available on daily charts
137

Bearish engulfing pattern and Intraday charts


We are less
strict with the
definition of
some patterns
on intra-day
charts.

Classic bearish engulfing


pattern has open above prior
session close. With intraday
open can = prior close.

138

Intra-day candle patterns


al

Although open and


close are the same,
view this as dark
cloud

Bullish engulfing
pattern
Open and
closings are
about the
same, still
view this as a
morning star

139

Windows on intraday
Most intraday
windows will be
between the last
candle yesterday
and the first
candle today

140

Intraday Techniques

Combining intraday signals with


longer time frame support or
resistance.

141

Daily chart for support

(slide 1 of 2)

June
14
We see a solid band of support near 43 at the circles dual
bullish engulfing patterns on the week of June 3. There was a
test of this support on June 14. We are thinking of buying on the
session at the arrow as the stock gets near this support on June
26. We then turn to an intra-day chart to see if there are any buy
signals as the stock as it approaches 43 .. (see next chart).

142

Buying
area

Intra-day to place trade on confirmation of support


level obtained from daily chart (slide 2 or 2)

Hammer

143

On this 5 minute chart on


June 26, the dashed line
shows support area obtained
from prior daily chart near
43 . This level was
confirmed by a hammer
which held as support on a
retest.

Use time frame of higher degree for resistance (slide 1 of 2)


AMER EXPRESS CO

45.5
45.0
44.5
44.0
43.5
43.0
42.5
42.0
41.5
41.0
40.5
40.0

The volume spike on the falling window


on this daily chart increases the
significance of this resistance. So we have
resistance near $40. Now lets shift to the
intra-day chart to see if there are any
bearish signals as the market approached
this resistance near $40..

39.5
39.0
38.5
38.0
37.5
37.0
36.5
36.0
35.5

Volume

8000
7000
6000
5000
4000
x1000

15

22

29

6
May

144

13

20

28

3
June

10

17

Intra-day chart to position trade

(slide 2 of 2)

Falling
window

The
spinning
tops helped
confirm the
importance
of the
falling
windows
resistance
near $40
145

Chart of higher degree (slide 1 of 2) Daily


On session X stock broke the
support level of rising window 1.
We therefore look for next support
at rising window 2 at 2090 to 2080.
We then turn to the intraday chart
after session X to see if there are
any buy signals at 2090/2080..

146

Chart of higher degree (slide 2 of 2) 5 Minute

Support level based on


daily chart confirmed
by a hammer and
morning star on this 5
minute chart

147

Daily for Support /intraday for positioning slide 1 of 2

Former resistance

148

Change of
polarity now
forecasts
support near
70. We then
turn to
intraday..

Daily for Support /intraday entry slide 2 of 2


Near 70 we get a bullish engulfing
pattern on this 30 minute chart with
lighter volume on black candle and
increased volume on white.

149

Bearish shadows
confirming
resistance

Intraday Techniques

Harnessing intraday charts for


signals not available on daily charts

150

Oversold? - Daily Chart

(slide 1 of 2)

On this daily chart it


looks oversold

151

Look oversold now? 30 minute charts (slide 2 of 2)

This intraday chart gives


a different perspective

152

Intra-day window not a window on daily

27th

153

28th

Using intra-day charts for windows

no window on this
daily chart on June 7but check intra-day
chart

154

(slide 1 of 2)

Using intra-day charts for windows

Top of falling
window

June 7
155

(slide 2 of 2)

Using intraday charts

slide 1 of 2
Prior high

Why is this market


having trouble near
1325 from Aug. 913? Isnt first
resistance at the
prior high near
1355?

156

Using intraday charts

slide 2 of 2

This hourly chart shows something the daily


chart didnt there was a resistance zone
near 1325.

157

Using intra- charts for support -

(slide 1 of 3)

On this daily chart on


this day (Oct.1) where is
1st support? Try shifting
to an intra-day chart

158

Using intraday chart for support -

slide 2 of 3

On this 30
minute chart on
Oct.1 is there a
support area?

Oct. 1

159

Using intraday chart for support This chart shows


action after Oct. 1.
Note how the 88
area held as
support.

160

slide 3 of 3

Intraday trading tactics

slide 1 of 3

On this daily chart, wheres R1


as of Dec. 3? Is it 955 or
something else? Lets go to the
intra-day chart

Dec. 3

161

Intraday trading tactics

slide 2 of 3

Dec. 3
See any
resistance here
before 955 on
this 30 minute
chart?

162
162

Intraday trading tactics

slide 3 of 3

Subsequent Price Action

Dec. 3

163

Using Intraday Charts Daily Chart

After this session


(March 20)
wheres R1?

164

(Slide 1 of 3)

Using Intraday Charts Hourly Chart

(Slide 2 of 3)

March 20
165

Using Intraday Charts Daily Chart

166

(Slide 3 of 3)

Candle Charts

Western

The Trading Triad


Money Management

Candlecharts.com
Helping Clients Spot Market Turns Before the Competition

167

Candlecharts.com

Trading Tactics
Timing
Market Chameleon
Trend
The Three Cs

168

Candlecharts.com

His potential is that of


the fully drawn bow, his
timing the release of the
trigger

Market Timing

169

Trading Tactics Timing


INTEL CORP

27.5
27.0
26.5
26.0
25.5
25.0
24.5
24.0
23.5

Normally one waits for a


close to confirm a bullish
engulfing pattern, but
considering support was
holding on the open of this
session, once the candle gets
above the prior black candle
intraday one can consider
buying lightly.
10
ember

170

24

1
October

15

22

29

5
November

23.0
22.5
22.0
21.5
21.0
20.5
20.0
19.5
19.0

Trading Tactics- Entering a Trade


The morning star pattern is not
completed until the third candle
line. However, in this scenario
the second session of that
potential pattern is confirming
the windows support area. As
such, one could buy lightly there.

Morning star

Rising window

171

Trading Tactics not waiting for the close

172

When to initiate a position


Although the
doji made a new
high close for
the move- it is
confirming a
resistance area.
As such we can
consider selling
lightly.

173

Trading Tactics Case Study


FOMENTO MEXICANO
44.5
44.0

The close of this session


completes an island
bottom. But with the
gap higher opening one
could consider buying
on the opening.

43.5

Dark cloud
cover as
exit signal

43.0
42.5

42.0

41.5
41.0

40.5

40.0
39.5

39.0

38.5
38.0

37.5

37.0
6

174

11

12

13

14

15

19

20

21

22

25

26

27

28

1
4
March

11

12

13

14

Trade Tactics Case Study


ADELPHIA STK C
26.5

Small
bearish
engulfing
pattern as
exit

26.0
25.5
25.0
24.5
24.0
23.5
23.0

or close
under
bull
channel

22.5
22.0
21.5
21.0
20.5

Hammer
and Bullish
Shadows
to enter
4
February

175

11

19

25

4
March

20.0
19.5
19.0
11

Candlecharts.com

Only those who


understand adaptation
will win the battle

Market Chameleon adapt to changing


market conditions
176

Nison Trading
Principle
Being a Market Chameleon:
As the market environment changes
based on what the technical signals are
telling us we should adapt our market
outlook

177

Market Chemeleon

orginal
Falling
target
window
Shooting star
(new target)

Buy

178

Buy on these back to back


hammers. Original target is
resistance as defined by recent
high and falling window. With
the resistance and decline from
the shooting star that zone now
becomes the area to take
profits.

Adapting to the Market


Breakout
Over
Resistance

A prudent trader never


argues with the tape.
Markets are never
wrong-opinions often
are.

179

Dark Cloud
Cover!

Adapting to the Market


?
Closed over
Windows
Resistance

180

Being a Market Chameleon


The triangles show a support
level, but once broken we
should adapt our stance to
what the market is telling us.
(Observe the change of
polarity)

181

Adapting to the market


Normally we look for the
lows of the bullish engulfing
pattern as support. In this
case once the hammer is
formed (at the arrow) we
then adjust our buy point to
the hammers support area.

182

Nison Trading
Principle
The IfThen Rule:
If the market does not act as forecasted then
exit the position
Initiate a position when the market justifies
your potential trade (i.e. if near resistance, If the
market breaks above resistance, Then one can
buy.
183

If.Then Rule

(slide 1 of 2)

Head and Shoulders


Top?

184

If.Then Rule

(slide 2 of 2)

Was Head and Shoulders


Top Confirmed ?

185

If.Then Rule

The bullish
ascending triangle
and the new high
close for the move
strongly hints that
the market will
break out. But
resistance held.

186

Candlecharts.com

Take advantage of
field conditions

Prevailing Trend

187

Nison Trading
Principle
Initiate new trades in the direction of
the major trend (unless you are looking
for a small move):
On bullish signals in a bull market buy long. On bullish
signals in a bear trend, cover shorts.
On bearish signals in a bear trend, sell short. On bearish
signals in a bull market, liquidate longs.
188

Battle of the Windows slide 1 of 2


Falling
window as
resistance

Rising
window as
support (also
a breakaway
gap)

Is there a way to forecast


which way the market will
break out?

189

Go with the trend slide 2 of 2


Falling
window

Rising
Window

Based on the market holding


above this 30 period moving
average the odds favor a
breakout to the upside

190

Importance of Trend
Change of
Polarity

Resistance zone
Concept: place trade in
direction of prevailing trend.
Since this is down we should
look for bounce from bullish
engulfing pattern and then sell
short at change of polarity.

191

Go in the direction of the prevailing trend


The bullish rising windows are within a
bear trend. This warrants covering shorts
at the windows support, rather than
placing new long trades (unless you are
just looking for a small bounce)
Long upper
shadows and
spinning tops
are warning
signals

Rising
windows
192

Candlecharts.com

The Three Cs of Money


Management
Candle in Context
Consider Risk-Reward
Confirmation

193

Candlecharts.com

Know the lay of the


land

Candles in Context

194

Nison Trading
Principle
Candle signals must be
evaluated and acted upon
within the markets context
for example what happened
before the signal?
195

Candles in Context

Would you
buy on this
hammer?

196

Patterns in Context bullish signal at resistance

window

197

Although there was a


bullish engulfing
pattern, this
potentially bullish
signal came at a
resistance level at the
small falling window

Candle Signals within market context


TRIBUNE CO
45.0
44.5

Below the stomach pattern


is the rising window keeps
the uptrend intact.

44.0
43.5
43.0
42.5
42.0
41.5
41.0
40.5
40.0
39.5
39.0
38.5
38.0
37.5
37.0
36.5

4
bruary

198

11

12

13

14

15

19

20

21

22

25

26

27

28

1
4
March

Candles in Context

What are two


reasons not to sell
on this doji?

199

Candles in Context

Hammer,
but??

200

Candles in Context
Not an ideal dark cloud
cover, but??

201

Trading Tactics - Candles in Context

1
a) What are the candle lines at
the arrows at 1 and 2 ?
b) Where would you be more
bullish, at 1 or 2, and why?
c) On what candle line would
you buy after the signals at 1
and 2?
d) If you buy at 1 or 2 where
is a potential protective sell
stop?

202

Nison Trading
Principle
Do not only consider the
markets price. Analyze the
shape and size of candle
lines at that price.
203

How are new highs are made

204

204

How are new highs or lows made


New High Close

Bulls cant sustain


rallies for more than
one session as shown
my the red arrow.

205

How are new highs made?

206

How are new highs/lows made?

207

The water looks fine!

208

Candlecharts.com

Those knowing when


to fight and when not
will be victorious

Consider risk-reward

209

Nison Trading
Principle
Even a perfect candle signal
does not equal a good trade!
YOU MUST ALWAYS
JUDGE THE POTENTIAL
TRADES RISK-REWARD.
210

Stops

211

Stops

window

Window as support shown


by bullish shadows and
hammers at the arrows.
Once the support is broken
we must readjust our
bullish view.

212

Obtaining targets

Buy on the hammer


during the week of
April 8, an obvious
resistance area would
be towards 615.

213

hammer

Obtaining Price Targets


Shooting
Star

Shooting star confirms


resistance at top end of
box range. Sell on the
shooting star with a
potential target at bottom
of the box range near 55.

214

Using Western TA for target


1075

DJ INDU AVERAGE

1070
1065
1060
1055
1050
1045
1040
1035
1030
1025
1020
1015
1010
1005
1000

Bullish engulfing
pattern gives a turning
signal with falling
resistance line as a
target

995
990
985
980
975
970
x10

19

215

25

4
March

11

18

25

1
April

15

22

29

6
May

Trading Tactics- Case Study


COMVERSE TECH
13.5
13.4
13.3

Bearish
engulfing
pattern

Bullish shadows at arrows show demand. A hammer is


a potential buy signal. If the trader feels that the
market was to high to buy on the next sessions open,
there is now a window as support. On a correction, we
can buy within the window. A potential target is the
April highs near 13.4. Once there a bearish engulfing
pattern confirms this resistance.

13.2
13.1
13.0
12.9
12.8
12.7
12.6
12.5
12.4
12.3
12.2
12.1
12.0
11.9
11.8
11.7
11.6

Rising
window

11.5
11.4
11.3
11.2

Hammer

11.1
11.0

15

22

29

6
May

216

13

20

28

10.9

Trading Tactics- Targets


FIDELITY NATL

32.0
31.5
31.0
30.5
30.0
29.5
29.0
28.5
28.0

1) Buy on first hammer, exit at bearish engulfing


pattern (circled). This bearish engulfing pattern
took on extra significance since it also confirmed
resistance.

hammers

27.5
27.0
26.5

Or

26.0

2) Sell short at bearish engulfing pattern Volume


and exit
at second hammer (which confirmed the first
hammers support area).

217

20

28

3
June

10

17

1000
900
800
700
600
500
400
300
x1000
24

1
July

15

Trading Tactics- Targets


Use hammer to buy
and window to exit
Falling window

hammer

218

Hammer and Risk/Reward

reward

Risk

219

Risk/Reward
INTL GAME TECH
69.5

Morning doji star as support. Buy on


hammer, target is recent pivot high. This
represents an attrive r/r.

69.0
68.5
68.0
67.5
67.0

Pivot
high

66.5
66.0
65.5
65.0
64.5
64.0
63.5
63.0
62.5
62.0
61.5
61.0
60.5
60.0

14

220

22

28

4
February

11

19

25
Ma

Risk/Reward

If you buy
here, what is
the target?
What is the
risk?

221

Risk/reward
With a purchase at
the hammer and a
target to the falling
window we have a
good r/r trade.

222

Risk-reward
Two hammers at 1
and 2. But due to
falling windows only
hammer 2 presents a
buying opportunity
due to the r/r.

223

Price targets slide 1 of 2

On this morning
star pattern where
is the stop? And
where is a
potential price
target?

224

Price targets - slide 2 of 2


H
Falling
window

On this morning
star pattern where
is the stop? The
low of the pattern.
And pick a
potential price
target. The falling
window and the
high at H where the
sell off began.

225

Subsequent
action

Slide 226

Candlecharts.com

He whose ranks are


united in purpose will
be victorious

Confirmation

226

Nison Trading
Principle
The more signals- either
candle or Western or a
combination of both
converge at the same level,
the more likely a reversal.
227

Cluster of Candles

1- falling window keeps trend


down
2- bullish shadows hint bears
losing force
3 and 4- bullish engulfing
pattern and rising window
prove bulls have taken full
control

228

Confirmation

Bullish engulfing
patterns and bullish
shadows confirming
support zone.

229

Bearish engulfing pattern but what is confirmation?

230

P.R.O.F.I.T.S
Potent Insights
Reduce Risks
Outmaneuver your competition
Find Pivotal Support /Resistance
Identify False Breakouts
Terminate Bad Trades
Stay Alive!
231

Potent Insights
232

Potent Insights

233

Reduce Risks

234

Reduce Risk

235

Outmaneuver your
competition

236

Outmaneuver your competition

237

Find Pivotal
Support and
Resistance
238

Find pivotal support /resistance

239

Identify False
Breakouts
240

Identify False Breakouts

241

Terminate Bad
Trades
242

Terminate Bad Trades


Do these candle
lines give you a
sense that the
bulls are in full
control?

243

Stay Alive!

244

The race is not always to the


swiftest, but to those who keep
running.

245

How it all comes together (hourly)

246

Stay Alive- Confluence of signals for NASDAQ


1- Rising Resistance
Line
2- Shooting Star

2a Bearish Engulfing
3- Falling Window
4- Bearish Divergence
5- Failure at windows
resistance

4
247

Every time there is


a trade someone is
wrong!

248

Be sure to visit our site for our


newest products and services!
Web site: www. candlecharts.com
E-mail: nison@candlecharts.com
Telephone: 732.254.8660

249