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Michael C. Thomsett 
Candlestick Charting 
Profiting from Effective Stock Chart Analysis

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Cover of Michael C. Thomsett: Candlestick Charting (ePUB)

Investors and traders seek methods to identify reversal and continuation to better time their trades. This applies for virtually everyone, whether employing a swing trading strategy, engaging in options trading, or timing entry and exit to spot bull and bear reversals. Key signals are found in the dozens of candlesticks, combined with technical signals such as gaps and moves outside of the trading range; size of wicks (shadows) and size of real bodies. The science of candlestick analysis has a proven track record not only from its inception in 17th century Japan, but today as well.


This book explains and demonstrates candlestick signals, including both the appearance of each but in context on an actual stock chart. It further takes the reader through the rationale of reversal and continuation signals and demonstrates the crucial importance of confirmation (in the form of other candlesticks, traditional technical signals, volume, momentum and moving averages).


Michael C. Thomsett is a market expert, author, speaker and coach. His many books include Mathematics of Options, Real Estate Investor’s Pocket Calculator, and A Technical Approach to Trend Analysis.


A video of the author titled ‘Candlesticks for Option Timing’ can be found here:


https://www.youtube.com/watch?v=IIt H6OLh7TI

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Table of Content


Chapter 1: The Basic Candlestick  1


The Origin and Meaning of the Candlestick  2


Strengths and Weaknesses of Candlesticks  7


Paper Trading as a Testing Ground  12


The Skills Every Trader Needs  15


Candlesticks: General Observations Concerning Their Use  19


Expanding the Information Pool Effectively  22


Chapter 2: Single Stick Signs  27


Uptrends and Downtrends  28


The Significance of a Candlestick’s Shape  31


Variations on the Bullish Long Candlestick  33


The Mistake Pattern  35


The Spinning Top, Hanging Man, and Hammer  41


Line Signals  44


The Significance of Tails  45


Chapter 3: Double Stick Moves  49


Two Reversal Moves: Engulfing and Harami  50


More Reversals: The Inverted Hammer and Doji Star  56


Gaps and Lines  60


Neck Lines, Crows, and Rabbits  68


Reversal and Confirming Moves—Relative Values  78


Chapter 4: Complex Stick Patterns  81


Reversal Trend Change Patterns  82


Inside and Outside Formations  88


Reversal Stars and Abandoned Babies  91


Line and Gap Continuation Signals  95


Tower Tops and Bottoms  105


Chapter 5: Reversal and Continuation Pattern Analysis  109


Strong Top and Bottom Signals  111


Stars, Kicks, Swallows, and Sandwiches  117


Matching and Star Reversals  126


Ladders and “Major” Reversals  130


Sakata’s Five Methods  134



Price Patterns with Low Reliability  142


Strong Price Line Reversals  150


Recognizing the False Signal  165


Chapter 6: Volume and Volatility  169


Volume as a Price Indicator  169


Volume Indicators  174


Testing Price Volatility  183


Triangles and Wedges  185


Chapter 7: Buy and Sell Set-Up Signals  193


Price Spikes and Reaction Swings  196


Percentage Swing Systems  200


Short-Term Gapping Behavior  202


Anticipating the Trend During Consolidation  206


The False Indicator  210


Support and Resistance in the Swing Trade  214


Chapter 8: Swing Trading with Candlesticks  219


A Swing Trading Overview  220


Quantifying Price Movement with Candlesticks  223


The Importance of Convergence and Divergence  226


Primary Trends and Candlestick-Based Entry or Exit  230


Set-Up Criteria and Action Points  234


Selling Short in Swing Trades  239


Chapter 9: Spotting Trends and Using Trendlines  243


Identifying the Trendline  244


Trendlines and Confirmation Signals  249


Applying Moving Averages to Candlestick Analysis  252


The Channel Line  254


Chapter 10: Technical Indicators  257


The Value of Confirmation  258


A Review: Technical Analysis Basics  261


The Significance of Gaps  264


A Framework for Interpretation: Support and Resistance  267


Overbought and Oversold Indicators  270


Relative Strength Index (RSI)  270



Stochastics  272


MACD  273


Bollinger Bands  274


The Potential of Candlestick Signals  278


Glossary  281


Index  297

About the author

Michael C. Thomsett, Business and Investment Writer, Nashville, Tennessee, USA
Language English ● Format EPUB ● Pages 320 ● ISBN 9781501507298 ● File size 19.2 MB ● Publisher De Gruyter ● City MA ● Published 2017 ● Edition 1 ● Downloadable 24 months ● Currency EUR ● ID 6625267 ● Copy protection Adobe DRM
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