Advanced Candlestick

Charting Techniques:
Secrets to Becoming a
Samurai Trader

1
1
 “He who is well
prepared has won
half the battle”

2
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
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
session—the doji. This doji line hinted the bulls had lost full
of the market (note: it does not mean that the bears has taken
control).

6
 Warren Buffet’s Rules of
Money Management

Rule 1 – Not to lose money

Rule 2 – Don’t forget rule 1

7
 Nison Trading
Principle

Candlesticks do not give

price targets.

8
 Gravestone Doji

This doji takes on extra significance

because it confirms a resistance level

9
 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:
Doji in a “Box Range” is
To use a northern doji as a
signal we need to have an not a trading signal
uptrend to reverse

11
 Doji and trend

A doji in the middle

of a trading range has
no trend change
implications
Doji

“Box Range”

12
 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 market’s context

15
 Doji in Context

Need a
close
Concept:
under
If a doji makes a new
high close for the move,
here to
wait for bearish turn
confirmation with a close bearish
under the doji’s close

16
 Doji in Context
Which of these
scenarios is a more
likely top reversal?

Scenario 1 Scenario 2

17
 Doji, but New High Close

18
 Doji, but New High close

19
 Flexibility with Candles (and Confluence)

20
 Doji
TJX

What makes doji 2 42.5

different than doji 1? 42.0

1
41.5

2
41.0

40.5

40.0

39.5

39.0

38.5

38.0

37.5

37.0
28 4 11 19 25 4 11 18 25 1 8 15
February March April

21
 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 B-2 C-3

28
 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 B-2 C-35

Resistance
Rally may Market not confirmed by
just be overextended doji
starting

29
 Doji Overview – Analyze Each Doji in Context of Trend
HEIDRICK STRUGG 20.5

20.0

19.5

19.0

18.5
4
5 18.0

17.5

17.0

6 16.5
3
16.0

15.5

15.0

2 14.5

14.0

13.5
1
15 22 29 5 12 19 26 3 9 16 23
August September

30
 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 black or white
• Market in an up trend

•Implication: ‘Signaling Trouble Overhead”

35
 High Wave Candles

Criteria: very long shadows and lower

small real body - color not important

Implication: Trend is losing force

36
 High Wave Candle

Who’s in Charge?

Who’s 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

Implication: “Market has lost it’s sense

of direction”
39
 High-wave candle
RDY

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

40
 Engulfing Patterns
Bearish Criteria:
• White real body wraps around
Engulfing preceding black real body
Pattern
• Market in down trend

•Implication: Market bottoming out

Criteria:
• Black real body wraps around
preceding white real body
Bullish
• Market in up trend Engulfing
Pattern
Implication: ‘Bulls have been
41 constrained”
Bullish engulfing pattern as support
ORACLE
10.3
10.2
10.1
One of most powerful aspects of 10.0

the bullish engulfing pattern is 9.9

9.8
their use as support. 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 14 21
October

42
Bullish engulfing pattern
S&P Continuation
Shooting
star

Note how
many black
candles the
white
candle
wrapped
around

43
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 Center tall
of the tall white real body as white
an entry point. Keep in the
mind the risk –reward of the
trade.

44
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 8.7

8.6
the real bodies. Here they are 8.5

equal size, so reversal is less 8.4

8.3
likely. Final confirmation of 8.2

it’s failure comes with the close 8.1

8.0
under its support area. 7.9
1 8 15 22 29 6
April May

49
 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

Blended candle real body = open

of the first session, close of the
last session. Blended candle
shadows = highest high and
57 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 ☺9 ☺9
☺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

Implication: Prior trend doesn’t

63 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) doesn’t overlap first
session’s 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
2
• Second real body (black or white
spinning top) doesn’t overlap first
session’s real body
• Third candle (black) closes deeply in
first white real body
3
Implication: Bears are taking control 1

70
 Nison Trading
Principle

Candle signals must be

evaluated and acted
upon within the market’s
context

71
 Evening Star compared to Morning Star

Evening Star

How about
here?
Would you
buy here?

Morning Star

72
 Evening Star and Risk/ Reward
HEIDRICK STRUGG

20.0

19.5

Evening Star
19.0
completed here. This
is likely a poor 18.5

risk/reward for a short This doji 18.0

sale. confirms
the 17.5
resistance
area set by 17.0

the evening
16.5
star and as
such may
16.0
offer a
better r/r. 15.5

15.0

14.5

14.0

24 1 8 15 22 29 5 12 19 26 3 9 16 2
July August September

73
 Windows

Rising Falling
Window Window

74
 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
window’s
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 8 15 22 29 6 13 20 27
April May

78
 Breakaway Gap

79
 Breakaway gap
INTL GAME TECH
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
The stock not only breaks 59.0
58.5
support – but does so with a 58.0
57.5
falling window. This increases 57.0
56.5
the potency of the window’s 56.0

resistance. Note the shooting star 55.5

55.0
and bearish engulfing pattern on 54.5
54.0
the rebound 53.5
22 28 4 11 19 25 4 11 18 25 1 8 15 2
February March April

80
 Breakaway Gap
MICROSOFT
70.0
69.5
69.0
68.5
Gapped under 68.0
support 67.5
67.0
66.5

Small 66.0
65.5
windows 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
31 7 14 22 28 4 11 19 25 4 11 18 25
2002 February March

81
 Breakaway Gap

82
 Nison Trading
Principle

With windows size does

not matter.

83
 Large and small windows

Large
window with
the bottom Small
of this window
window as
pivotal
support

84
 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 26.0

27.09, low the next
25.5
session was 27.21
25.0

24.5

24.0

23.5

16 17 18 19 22 23 24 25 26 29 30 31 1 2 5 6 7 8
August

86
 Small Window

87
 More than three windows
Closed under the
top window’s
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 Rising
have to Window

go to
1993
for next
support

93
 Window as a target

target

Buy here

94
 Rounding Tops/Bottoms

Fry Pan Bottom Dumpling Top

95
 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
Congestion 13.2
13.1
band 13.0
12.9
12.8
12.7
12.6
12.5
12.4
High price 12.3
12.2
gapping 12.1
12.0
play 11.9
11.8
11.7
11.6
11.5
11.4
11.3
11.2
11.1
11.0
10.9
10.8
8 15 22 29 6 13 20
July

101
 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
E
market find support near $18?

C D

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 counter-
attack pattern
3. Why did the rally stall at E and what was
the candle signal formed? –The falling window E
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
A

Small rising
window

C D

105
 Record Sessions
Overbought / Oversold Indicator

9 record session highs 9

8
7
6
5
4
3
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

8 25 2 9 16 23 30 6 13 20 27 4 10 24
July August September

113
Rising and Falling Three Methods

Rising Three Falling Three

114
 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 20 21 22 25 26 27 28 1 4 5 6 7 8 11 12 13 14 15 18 19 20 21 22 25 26 27 28 1
March Ap

115
 Open below/above the Stomach

close

Below Middle White Above Middle Black

116
 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 Bullish
122
 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 counter-
attack

126
 Convergence of Clues- Counter Attack

Bearish counter
attack Bearish engulfing
pattern
doji

127
 Bearish Counter-attack

Counter-
attack 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 – where’s R1? (slide 1 of 2)

132
 Phantom method (slide 2 of 2)

133
 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

Although open and

al 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 ¼ 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 Buying
session at the arrow as the stock gets near this support on June area
26. We then turn to an intra-day chart to see if there are any buy
signals as the stock as it approaches 43 ¼ ….. (see next chart).

142
Intra-day to place trade on confirmation of support
level obtained from daily chart (slide 2 or 2)

On this 5 minute chart on

June 26, the dashed line
shows support area obtained
from prior daily chart near
43 ¼. This level was
Hammer confirmed by a hammer
which held as support on a
retest.

143
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 39.5
39.0
on this daily chart increases the
38.5
significance of this resistance. So we have 38.0
resistance near $40. Now let’s shift to the 37.5

intra-day chart to see if there are any 37.0

36.5
bearish signals as the market approached
36.0
this resistance near $40….. 35.5

Volume
8000
7000
6000
5000
4000
x1000
8 15 22 29 6 13 20 28 3 10 17
May June

144
Intra-day chart to position trade (slide 2 of 2)

Falling
window

The
spinning
tops helped
confirm the
importance
of the
falling
window’s
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 X
at rising window 2 at 2090 to 2080.
We then turn to the intraday chart
1
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

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

148
Daily for Support /intraday entry – slide 2 of 2

Near 70 we get a bullish engulfing

Bearish shadows
pattern on this 30 minute chart with confirming
lighter volume on black candle and resistance
increased volume on white.

149
 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
28th

153
Using intra-day charts for windows (slide 1 of 2)

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

154
Using intra-day charts for windows (slide 2 of 2)

Top of falling
window

June 7

155
Using intraday charts – slide 1 of 2

Prior high

Why is this market

having trouble near
1325 from Aug. 9-
13? Isn’t first
resistance at the
prior high near
1355?

156
Using intraday charts – slide 2 of 2

This hourly chart shows something the daily

chart didn’t… 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 - slide 3 of 3

This chart shows

action after Oct. 1.
Note how the 88 ½
area held as
support.

160
Intraday trading tactics – slide 1 of 3

On this daily chart, where’s R1

as of Dec. 3? Is it 955 or
something else? Let’s 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 (Slide 1 of 3)

After this session

(March 20)
where’s R1?

164
Using Intraday Charts – Hourly Chart (Slide 2 of 3)

March 20

165
Using Intraday Charts – Daily Chart (Slide 3 of 3)

166
 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
 “His potential is that of
Candlecharts.com 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 23.0

close to confirm a bullish 22.5

engulfing pattern, but 22.0

considering support was 21.5

holding on the open of this 21.0

session, once the candle gets 20.5

above the prior black candle 20.0

intraday one can consider 19.5

buying lightly. 19.0

10 24 1 8 15 22 29 5
ember October November

170
 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 window’s 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 43.5

completes an island Dark cloud 43.0

bottom. But with the

cover as 42.5
gap higher opening one
could consider buying exit signal 42.0

on the opening. 41.5

41.0

40.5

40.0

39.5

39.0

38.5

38.0

37.5

37.0

6 7 8 11 12 13 14 15 19 20 21 22 25 26 27 28 1 4 5 6 7 8 11 12 13 14
March

174
 Trade Tactics – Case Study
ADELPHIA STK C
26.5

Small 26.0

bearish 25.5
engulfing
pattern as 25.0

exit 24.5

24.0

23.5

23.0

or close 22.5
under 22.0
bull
21.5
channel
21.0

20.5

Hammer 20.0
and Bullish
19.5
Shadows
to enter 19.0

4 11 19 25 4 11
February March

175
 “Only those who
Candlecharts.com 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
Buy on these back to back
hammers. Original target is
resistance as defined by recent
orginal high and falling window. With
Falling
target the resistance and decline from
window the shooting star that zone now
becomes the area to take
profits.
Shooting star
(new target)

Buy

178
 Adapting to the Market
Breakout
Over Dark Cloud
Resistance Cover!

A prudent trader never

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

179
 Adapting to the Market

Closed over
Window’s
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 hammer’s support area.

182
 Nison Trading
Principle
The If…Then 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
 “Take advantage of
field conditions”
Candlecharts.com

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 window’s 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
 The Three Cs of Money
Candlecharts.com Management

Candle in Context

Consider Risk-Reward

Confirmation

193
 “Know the lay of the
Candlecharts.com land”

Candles in Context

194
 Nison Trading
Principle

Candle signals must be

evaluated and acted upon
within the market’s 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

Although there was a

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

197
 Candle Signals within market context
TRIBUNE CO
45.0

44.5

Below the stomach pattern 44.0

is the rising window keeps 43.5

the uptrend intact. 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 5 6 7 8 11 12 13 14 15 19 20 21 22 25 26 27 28 1 4 5 6 7 8
bruary March

198
 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

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? 2

202
 Nison Trading
Principle

Do not only consider the

market’s 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’ can’t 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
 “Those knowing when
Candlecharts.com 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
TRADE’S 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 hammer
be towards 615.

213
 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
DJ INDU AVERAGE 1075

1070
1065

1060
1055

1050

1045

1040
1035

1030
1025

1020

1015

1010
1005

1000

Bullish engulfing 995

pattern gives a turning 990

985
signal with falling 980
resistance line as a 975
target 970
x10
19 25 4 11 18 25 1 8 15 22 29 6
March April May

215
 Trading Tactics- Case Study
COMVERSE TECH
13.5
13.4
13.3
Bullish shadows at arrows show demand. A hammer is Bearish 13.2
a potential buy signal. If the trader feels that the engulfing 13.1
market was to high to buy on the next session’s open,
pattern 13.0
there is now a window as support. On a correction, we 12.9
can buy within the window. A potential target is the 12.8
April highs near 13.4. Once there a bearish engulfing 12.7
pattern confirms this resistance. 12.6
12.5
12.4
12.3
12.2
12.1
12.0
11.9
11.8
11.7
11.6

Rising 11.5
11.4
window 11.3
11.2
Hammer 11.1
11.0
10.9
15 22 29 6 13 20 28
May

216
 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 hammers 27.5

pattern (circled). This bearish engulfing pattern 27.0

took on extra significance since it also confirmed
resistance. 26.5

Or 26.0

2) Sell short at bearish engulfing pattern Volume

and exit 1000
at second hammer (which confirmed the first 900
800
hammer’s support area). 700
600
500
400
300
x1000
3 20 28 3 10 17 24 1 8 15
June July

217
 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 69.0

hammer, target is recent pivot high. This 68.5

represents an attrive r/r. 68.0

67.5

67.0

Pivot 66.5

high 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 22 28 4 11 19 25
February Ma

220
 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 Subsequent
potential price action
target. – The falling
window and the
high at H where the
sell off began.

225
Slide 226

“He whose ranks are

Candlecharts.com 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
2- Shooting Star
3 5
2a – Bearish Engulfing
3- Falling Window
4- Bearish Divergence
5- Failure at window’s
resistance

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