Learning About Candlestick Charts

CANDLESTICK CHARTING has its own unique language and terms like Marubozu, Spinning Tops, Doji, Harami Position, Hammer, Hanging Man, Shooting Star and a more. Understanding their meaning, including a feel of the emotions involved, may give us a better insight about some ways we can be play the stock trading game.

Marginal Stock Trader became aware of candlestick charts only for a couple of weeks. Thus, his familiarity with it maybe described as superficial at best. Nevertheless, let us see how a novice can use this technical analysis tool for his day-to-day stock trading operations.

For Week 24 covering the trading period June 8 to June 12, our general outlook is to take a long position in Ayala Corporation. Please read our previous post Japanese Candlesticks for Stock Trading for more details.

June 8, 2009
Ayala Corporation open equals the high of 305 pesos and the close equals the low of 300 pesos. This indicates that sellers controlled the price action from the first trade to the last trade.

The stock traded at 305 pesos for over an hour until 10:10 a.m. The next 15 minutes of trading was at 302.50 pesos. And from 10:25 a.m. onwards, the price stayed at 300 pesos.

Trading range was narrow at 5 pesos and is equal to 2 fluctuations. Main number of trades was placed at 89. It looks like both sides - buyers and sellers - are positioning themselves for the next move. That includes Marginal Stock Trader who bought 10 shares at 312.50 pesos last week.

Learning by experience
Admittedly, Marginal Stock Trader is just very new to this candlestick chart. Nevertheless, we would like to write about how we are applying this tool in our online stock trading so we could learn some hard lessons by experience.

Trading range
By our own reckoning, we consider the trading range to be somewhere between 300 pesos (support) to 315 pesos (resistance). A break above 315 pesos is a victory for the bulls (demand) and a break below 300 pesos is a victory for the bears (supply).

Price fluctuation
In terms of price fluctuation, we would consider 5 pesos to be narrow, 10 pesos is somewhat wide, 15 pesos is wide, and 20 pesos to be very wide.

Outlook for June 9, 2009
Based on experience of recent weeks, we would say the trading range is good for 6 to 8 trading days, then price breaks out above the trading trading range. This break is usually indicated by a gap up, or sometimes by a wide price fluctuation. The trendine is consistently upwards for the past weeks. But we also know that today's close, as well as last week's closing prices, is already approaching the 52-week high for Ayala Corporation. In addition, the stock is approaching the current resistance level, hence an alert to look for signs of increased selling pressure and potential reversal.

Our data source is the Philippine Stock Exchange through our online broker: BPI Trade.

Ayala Corporation Declares Cash Dividend

AYALA CORPORATION (AC) Board of Directors, at its meeting held 04 June 2009, has approved the declaration of regular cash dividend.

Ayala Corporation will pay regular cash dividend of 2.00 pesos per share for the first semester ending 30 June 2009, the company said in a disclosure sent to the Philippine Stock Exchange after the board meeting.

Marginal Stock Trader remains firm on his decision to have a long position in Ayala Corporation stock this month of June 2009 even after the dividend declaration.

Our trendline moving upwards established almost a month ago remained intact despite the lower closing prices of the past two days. The downward closing prices are still above the primary and secondary lines of our trend channel.

Related Post
Long Position in Ayala Corporation

Long Position in Ayala Corporation

Marginal Stock Investor decided to have a long position in Ayala Corporation (AC) this June 2009 awaiting dividend declaration from the company.

A definition of long position found in the Merriam-Webster Online Dictionary is: "owning or accumulating securities or goods especially in anticipation of an advance in prices."

This decision is a little bit difficult to make since we are using the strategies designed for day trading.

You may recall we have said elsewhere that because of the rule provided by the Philippine Stock Exchange and our online broker BPI Trade - we may just be a similitude of the stock day trader, but more like the swing trader.

Nevertheless, here are some reasons why Marginal Stock Trader is now long on Ayala Corporation:

• stock price is trending upwards for over a month since May 2009;
• closing price on June 1, 2009 is above the 10-day moving averages for the two week period of May 15, 2009 to May 29, 2009;
• stock price high of 312.50 pesos on June 2, 2009 is still at a discount close to 50% compared to that when Marginal Stock Trader first invested in this issue sometime in February 2007 over 27 months ago .
  

Was the decision to buy 10 shares of AC at 312.50 pesos per share based on folly or wisdom? Let us find out after Marginal Stock Trader have sold the AC stock in a couple of weeks.

Reference
"long." Merriam-Webster Online Dictionary. 2009.

Merriam-Webster Online. 4 June 2009

Related Post
Ayala Corporation Stock Investment Update