Japanese Candlesticks for Stock Trading

JAPANESE CANDLESTICKS or candlestick charting is a tool for technical analysis that can provide us some useful insights into market moves suitable for purposes of our online stock trading.

Marginal Stock Trader decided to play around with candlestick charting for his online stock trading activities starting May 18, 2009.

WEEK 21

May 18, 2009

• closing price equals the low of 255 pesos
  
• close is lower than its opening price of 260 pesos
  
• little price movement and may represent consolidation
• most of the trading action was confined near the open and close
• sellers controlled the price action from the first trade, dominated during the session and drove prices lower though buyers later resurfaced to bid prices as high as 262.50 pesos
  
• high - low range is 7.50 pesos
  

May 19, 2009

• opening price equals the low of 260 pesos and the close equals the high of 267.50 pesos
  
• close is higher than close of previous day
  
• buyers controlled the price action from the first trade to the last trade
• prices advanced from open to close showing strong buying pressure indicating buyers were aggressive
• high - low range is 7.50 pesos, same as first trading day of Monday

May 20, 2009

• open equals the low of 270 pesos
• close of 277.50 pesos is higher than its opening price and the close of previous day
• buyers controlled the price action from the first trade and bid prices higher though sellers later forced prices down from the high of 285 pesos
  
• high - low range is 15 pesos
  

May 21, 2009

• close equals the low of 275 pesos
• close is lower than its opening price of 277.50 and the close of previous day
  
• little price movement and may represent consolidation
• most of the trading action was confined near the open and close
• sellers controlled the price action from the first trade, dominated during the session and drove prices lower though buyers later resurfaced to bid prices as high as 282.50 pesos
  
• pattern is similar to May 18 but with higher prices for open, high, low and close, as well as a narrower open - close range of 2.50 pesos
  

May 22, 2009

• conveys a sense of indecision or tug-of-war between buyers and sellers
• closed lower than Wednesday and Thursday but higher than Monday and Tuesday
  
• prices move above and below the opening level during the session, but closed at the same opening level of 270 pesos
  
• neither bulls nor bears were able to gain control and a turning point could be developing
• high - low range is 7.50 pesos
  

Outlook for Week 22

• sellers were unable to overcome the higher bid prices of buyers resulting to higher closing prices of Tuesday and Wednesday
• sellers took Monday and Thursday but then Thursday prices were higher for open, high, low and close compared to their Monday trading
  
• Friday trading is a standoff and conveyed a sense of indecision or tug-of-war between buyers and sellers
• the trend is upward, buyers were aggressive during the week and overall controlled the prices for the week, but then sellers were always waiting for their turn
• BUY WITH CAUTION, look out for possible consolidation and turning point
  

WEEK 22

May 25, 2009

• close equals the low of 270 pesos and the close of last trading day May 22
  
• close is lower than its opening price of 272.50 pesos
  
• little price movement and represent possible consolidation
• most of the trading action was confined near the open and close
• sellers controlled the price action from the first trade, dominated during the session and drove prices lower though buyers later resurfaced to bid prices as high as 275 pesos
  
• pattern is similar to May 21 but with lower prices for open, low and close
• narrow high - low range of 5 pesos
• BUY TOMORROW if prices hit below 270 pesos
  

May 26, 2009

• open equals the high of 275 pesos
• close of 265 pesos is lower than its opening price of 275 pesos
  
• sellers controlled the price action from the first trade and drove prices to a low of 260 pesos
  
• buyers later resurfaced to bid prices higher by the end of the session but still ended with a close of 265 pesos
• BOUGHT 10 shares of Ayala Corporation early at 265 pesos per share for a total cost of 2,675.26 pesos
  
• high - low range is 15 pesos
  

May 27, 2009

• open equals the low of 270 pesos
• close of 275 pesos is higher than its opening price and the close of previous day
• buyers controlled the price action from the first trade and bid prices higher though sellers later forced prices down from the high of 282.50 pesos
  
• potential bearish reversal
• sudden and sustained increase in selling pressure was indicated
• high - low range is12.50 pesos

May 28, 2009

• open equals the high of 275 pesos and the close of previous day
  
• close of 272.50 is lower than opening price
  
• little price movement and represented consolidation
• most of the trading action was confined near the open and close
• sellers controlled the price action from the first trade, dominated during the session and drove prices to a low of 270 pesos
  
• buyers later resurfaced to bid prices higher but still ended with a close of 272.50 pesos
• narrow high - low range of 5 pesos
• SOLD 10 shares of Ayala Corporation at the high of 275 pesos with net proceeds of 2,713.22 pesos, yielding a net profit of 38 pesos and exceeding our profit target of 30 pesos for each board lot of 10 shares

May 29, 2009

• results of this trading day is almost totally unexpected save for reinforcing the validity of our upward trendline for the stock
  
• open equals the low of 272.50 pesos
• close of 287.50 pesos is higher than its opening price and the highest for the past 10 trading days
  
• buyers controlled the price action from the first trade and bid prices higher but sellers later forced prices down from the high of 297.50 pesos
  
• wide high - low range of 25 pesos
  

Outlook for Week 23

• prices continue trending upwards
• buyers remain in control of the overall direction though not as aggressive
  
• high - low ranges varies from a narrow of 5 pesos to a wide 25 pesos
• further consolidation and reversals may still be possible
• BUY at the first opportunity and prepare to have a long position in Ayala Corporation
  

June 1, 2009

• results of this trading day confirmed the validity of our upward trendline for the stock
  
• open equals the low of 290 pesos
• close of 305 pesos is higher than its opening price and the highest for the past 2 weeks
• buyers controlled the price action from the first trade and bid prices higher but sellers later forced prices down from the high of 312.50 pesos
• wide high - low range of 22.50 pesos

June 2, 2009

• little price movement since most of the trading action was confined near the open of 315 pesos and close of 312.50
  
• buying pressure may be diminishing and the uptrend could be nearing an end
• selling pressure is starting to increase
• a change in trend may be near
• high - low range is 7.50 pesos
• BOUGHT 10 shares of Ayala Corporation at the high of 312.50 pesos per share for a total cost of 3,150.37 pesos since uptrend remains intact and the intention is to have a long position
  

June 3, 2009

• confirmed the downtrend indicated the day before coming from increased selling pressure
• little price movement since most of the trading action was confined near the open of 310 pesos and close of 305 pesos
• sellers were still unable to drive the prices under the Monday low of 290 pesos
• high - low range is 10 pesos
• hence, no decision to sell the shares
  

June 4, 2009

• for the third day in a row, sellers prevailed over the buyers
• little price movement was maintained since most of the trading action was confined near the open of 302.50 pesos and close of 300 pesos
• sellers were still unable to drive the prices under the Monday low of 290 pesos
• high - low range is 7.50 pesos
  
• hence, no decision to sell the shares
  

June 5, 2009

• open equals the low of 302.50 pesos and the close equals the high of 305 pesos
• buyers controlled the price action from the first trade to the last trade
• buyers overcame prior selling pressure but remained unclear whether new buyers will bid prices higher
• downtrend of the past three days was broken
• existing uptrend in place for three weeks remained valid
• hence, no decision to sell shares
  

Outlook for Week 24

• existing uptrend will remain intact
• selling pressure will be diminishing with buyers getting more aggressive
• sellers will still make attempts to force prices down from their highs
• wider range of 5 to 20 pesos for high - low prices may occur
• closing prices may approach our support level or the primary trendline of our trend channel organised some weeks ago
• TAKE A LONG POSITION in Ayala Corporation
  

Suggested Reading
Introduction to Candlesticks. (2009) In Stockcharts.com

Retrieved June 5, 2009, from
http://stockcharts.com/

Candlestick Bullish Reversal Patterns. (2009) In Stockcharts.com

Retrieved June 5, 2009, from
http://stockcharts.com/