Forum Archive Index - December 2001

[Phaedrus <Phaedrus@techemail.com>]

 Well, that didn't take long to resolve. TEL closed today at $4.98, down 10 
cents and well below the medium-term trendline. This closed out a trade entered 
on the trendline break at $4.61, giving a profit of 8% in 7 weeks - well over 
1% gain per week.
 I have added a 14 day RSI, with a trendline drawn below it to illustrate what 
Nick McCaw was talking about. As you can see, this gave an excellent exit 
signal which would have got you out at $5.08.
 This chart is yet another example of just how good candlesticks can be. 
"Dragonfly Doji" often appear at the end of a downtrend, and this one forms 
part of a perfect "Doji Morning Star" formation - this is a classical reversal 
pattern, made even stronger here by the presence of a very long lower shadow on 
the Doji itself, and the long white candle following which also closed at its 
high (White Closing Marubozu) as well as closing well above the high of the 
first candle.
 Gravestone Doji are often found at the end of uptrends, and as you can see, 
these two Doji precisely delineated the maximum range of this uptrend. Anyone 
trading these two patterns would have bought at $4.35 and sold at $5.10.
 Candlesticks give unique insight into market dynamics, insight that is 
unavailable by any other means. They are applicable to any timeframe, ranging 
from minutes to months. Long-term investors could use weekly or even monthly 
candlesticks. Even if you reject all other TA methodologies, I would strongly 
urge you to read something on candlesticks. There is good reason why they have 
been in use for centuries.
 A good introductory text is "Japanese Candlestick Charting Techniques" by 
Steve Nison.  US $52.  Steve Nison is the man generally credited with 
introducing candlesticks to the western world.
        Phaedrus.

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