Candle Stick Pattern

Doji:It is a very important candlestick, as it many times presages a shift in, or

even a reversalof, a current trend.
they act as valuable entry, exit, andmoney-management signals.

Hammer:When you see a hammer form in the context of a downtrend, it

may signify that the downtrend will slow and change direction by moving
sideways or reversing to move upward. Think: hammer it back up.

Hanging man:If a hanging man appears tn an uptrend, the connotation is

evident right away. It's time to start playing the funeral march! If you're holding
a long position in this stock, take profits right away
Engulfing Pattern:It's a two-candlestick pattern consisting of
opposite-color real bodies. The second real body must completely "engulf' the
first real body. Translation: The opening 'price of the second real body must be
lower than the closing price of the first, and the closing price of the real body
must be higher than the opening price of the first.
That's called a "bullish engulfing pattern." The flip side of this is a "bearish
engulfmg pattern."

Dark cloud:it portends change when it appears at the top of an uptrend, or

toward the top of a congestion (sideways) move. The first candlestick is a clear
real body. The second real body opens above the close of the first, then closes
near the low of the range and deep within the price range of the first candlestick.
The deeper into the 'first real body (range) that the second one closes, the more
bearish the signal. Dark cloud cover indicates exactly what the name conveys-a
storm is brewing!

Bullish piercing pattern:in that the second candlestick (real body)

opens the previous candlestick's close, the piercing pattern shows that the
second real body should rise at least halfway into the previous dark real body.
The greater the second real body pierces the first, the greater the chance that it is
a strong reversal , pattern. So, when this two-candlestick pattern takes place at
the bottom of a downtrend,.look for a change in direction to begin.

Evening star,Morning star: qualify for "star" billing, the

candlestick should appear at the top (or bottom) of an uptrend (or downtrend),
have a short real body, and gap away (open higher in uptrend (or lower in
downtrend) from the previous andlestick. The co-stars: In the context of an
uptrend, the first real body should be long and clear. The third real body should
be long and dark, penetrating the real body of the first candle. In a downtrend,
the first real body is long and dark, then the star appears next. Finally, the third
real body moves up, well into the first dark real body.
Grave Stone Doji , Long Legged Doji:When you see a
gravestone doji form in an uptrend, and you're long that stock, take
profits immediately.
Spinning Tops and High Wave :Candlesticks with small real
bodies, of either color, are referred to as "spinning tops." The length and range
of their shadows may vary. Think of spinning tops as slightly "kinder, gentler"
versions of doji. Their siblings are "high wave" candlesticks, which are spinning
tops exhibiting very long upper and/or lower shadows. A group of high wave
candlesticks may forecast a trend reversal
Congestion: be aware of congestion in the sock market..it may move
upside or downside (bouncing too and fro between a support and resistance )

Indicators

Volume: Another volume signal for swing traders: After two to three (or
less) days up, if the current day made a new recent high and appears to be
ending in a doji, star, or spinning top (short real body) on low volume, it's a
good time to take profits. Why? Anyone of those three candlesticks translates
into "indecision" on the part of market players. Remember how low volume
means "low conviction"? Indecision plus low conviction equals falling prices.
illustrates this point. The final volume signal for both swing and position
traders? When climactic volume designated by a huge volume spikes near the
end of an extended uptrend or downtrend, it often indicates the current trend
may soon slow or halt. By "huge," I mean several times the usual daily volume.
If you trip over a mega-spike like this (you'll see some in the charts that follow)
and you're holding a position, take partial or complete profits.

Moving Averagers : Also, when a shorter time frame MA crosses

down over a longer-term MA, it gives a bearish signal. For example, when the
20-day MA crosses over the 50-day MA and continues south, that's a big
negative.
Moving averages also act as resistance. Once a stock trades under a major
moving average, that average will serve as a ceiling, or resistance, to hamper the
stock's rise. This is especially true with a stock that's fallen below the 200-day
moving average. A stock that's tanked under this power-average usually puts up
a struggle before clawing its way back through. Conversely, a stock that dips to
its 200-day MA, many times finds support on it.

Oscillators

Relative Strength Index: the RSI is plotted on a vertical scale

numbered from 1 to 100. It's considered to be oversold when it falls below 25,
and overbought when it rises over 75.

On-Balance Volume: On-balance volume (OBV) is a technical

trading momentum indicator that uses volume flow to predict changes in stock
price.
Stochastic: In tandem, the %K and %D lines rise and fall between zero
and 100. Readings above 80 are considered overbought, and readings below 20
are oversold.
Buy-when the lines are below 20, and the faster %K line crosses above the
slower %D line. (Watch out for short-term crossovers. Use indicators to confirm
the reversal.)
Sell-when the lines are above 80, and the %K crosses the %D to the
Downside

MACD: is a trend-following momentum indicator/oscillator that illustrates

the relationship between the 26-day and 12-day exponential moving averages of
an equity's price pattern. A 9-day exponential moving average, referred to as the
"signal line," overlays the MACD and indicates buy/sell setups.

Crossovers. Buy signal (bullish) equals when the MACD-H rises above its
zero line. Sell signal (bearish) equals when the MACD-H tumbles below the
zero line.
Overbought/oversold indicators. As an overbought/oversold oscillator,
when the MACD-H rises to the top of its scale and resembles a majestic
mountain, the stock may. be overbought and ready to pullback. When the
MACD-H edges below the zero line and digs a deep scoop to the downside,
the stock is oversold. when the histogram bars shorten and edge
back up, the stock should be preparing to bounce.

Bollinger Bands: the price pattern tends to fluctuate within the upper
and lower band. Further; when the price rises (or falls) to touch the boundary of
one band, it will then reverse and fall (or rise) to the opposite band.

+ When the price moves to touch one band, it usually reverses and heads all the
way to the other band (good for projecting price targets).
+ When the bands tighten because volatility lessens, look for a sharp price
change to occur. Hey, same action as a breakout from a consolidation pattern-
right? Right!
+ When the price pokes through and moves outside the band, that implies
strength in that direction-or a trend continuation
FIBONACCI RETRACEMENTS:
Fibonacci ratios are gauged at 38.2 percent, 50.0 percent, and 61.8 percent, and
are considered a leading indicator (predicting possible future price action).

Your job is to draw an uptrend (or downtrend) line, connecting a major peak
and trough. Then, activate your charting software's Fibonacci retracement
option. Start at the bottom of the trendline and drag your cursor to the top of the
trend. (Fancy charting programs will include a 23.6 percent line.) You'll see five
horizontal lines, representing 0.0 percent, then 38.2, 50, 61.8, and 100 percent
of the entire move, or trend.

These levels act as support and resistance areas.

Patterns
Continuation Patterns: flag lasts three days to three weeks and drifts
down against the prevailing trend. When it completes its action, the stock
resumes its previous trend.
The pennant resembles the flag, except that it moves horizontally in the shape of
a small, symmetrical triangle. It, too, lasts from a few days to just weeks.
Take special note of how the trend lines are drawn right
through the arrows. I did that on purpose. Those arrows
represent the day (on a daily chart) during which the uptrend
(downtrend) resumes.

REVERSAL PATTERNS: indicate that a change or trend reversal

is about to occur.

Double Top
When completed, it looks like an "M."
Indication: bearish.
How it happens: The stock is in an uptrend. It may become overextended
at the zenith of first top (of eventual double top). The price pulls back, and
then resumes its uptrend. When it reaches the resistance established by the
first peak, buyers refuse to pay higher prices. The price starts retracing to
previous pivot low, or middle of "M."
Completion: A double top concludes when the price completes final
retracement to middle pivot low of "M." (Think: an entire "M" is formed.)
Forecast: If the price falls below consolidation support, it will sink lower.
What you do: When you're holding a long position in a stock that's
approaching the second peak in an extended uptrend, monitor (where your
stock resides) conditions for weakness. Get ready to take profits. Also, if the
stock is overextended, trading high above its 20-day MA, take profits as soon as
you recognize this. To sell short, wait until the stock drops below the support
zone formed by the pivot lows, and then enter. This will be a "dark fall day."

Double Bottom
When completed, it looks like a "W."
Indication: bullish.
How it happens: The stock is basing after experiencing a downtrend. It
possibly bounces off previous support and rallies to establish the middle peak of
"W." It pulls back to the last pivot low (which becomes first pivot of double
bottom), and then bounces off that price support. (Buyers recognize a second
chance to "bottom fish.")
Completion: A double bottom is completed when the price rises to the middle
peak of the "W."
Forecast: Price will initiate an uptrend. Typically, though, it will consolidate
for days or weeks before that rise. The longer it consolidates, the more powerful
the breakout to the upside may be.
What you do: Monitor bases for double bottoms. When you see one forming
in a target stock, get ready for buy criteria to be met so you can pounce! (This
will be a "nice spring day.")
Cup-with-Handle:
Look for: A stock movil1:g sideways in a Stage One base dips to previous
support making a scoop (cup), then gradually rises to previous resistance.
It dips again-Qushing out "weak hands," or scared sellers-then returns again to
resistance (handle). Then it moves sideways in a tight consolidation range, until
high volume and other bullish market conditions propel it into an uptrend.
Indication: bullish.
Completion: When it concludes the handle by rising to the resistance line,
it has reached completion.
What you do: Monitor stock for completion of the pattern, and then enter.25
over breakout of consolidation, on a "nice spring day."
BUY TRIGGER LIST
To review, here's your complete Buy Trigger List. You may want to
copy it onto a regular sheet of paper to keep at your elbow when you
trade.
1. Market conditions, Dow and/or Nasdaq, are positive.
2. Target stock is a leading company in a leading industry.
3. Company fundamentals meet or exceed "IBD" standards.
4. Industry/sector is in an uptrend and positive on the day of your
trade.
5. Stock has formed a base, or is in the context of an uptrend on a
daily
chart. It's ready to break out of a consolidation or pullback to
support.
6. Strong volume on the break above resistance (yesterday's high).
7. Stock is bouncing off of, or is near, the 20-, 40-, or 50-day MA, and
it
is trading over the 50-day MA.
8. RSI is below 30 and hooking to the upside, or is making an
uptrend.
(It is not overbought.)
9. The OBV is rising or is in an uptrend.
10. Target stock is trading above its opening price and moving up on
the day. Buy signal: It .25 of a point over yesterday's high

SHORT SELLING LOOKOUTS

Indicators
Volume: As previously explained, volume may vary on falling stocks, but
in this setup, high volume (panicky selling) squashes the stock faster,
giving you a multiple-point profit in a short time period
Moving averages: Stock will be trading high above 20-day MA and all
other major MAs
RSI: Oversold
OBV: Falling
Bollinger Bands: Stock touching or approaching upper band, but unable to
penetrate it