Hi Eric,
I actually think the close price is the least important of the (open,high,low,close) prices. It is the price point that is least related to supply/demand and most related to an external event, i.e. market close. It is true that when a price stream doesn't have a high and low, all you can chart is the close. But if you have the high and low, then these are the prices where the supply/demand equation changed and are the prices I would consider as the support/resistance points. After all, all things being equal - yesterday's close on JNPR is the most likely to be different if the market had closed at 4:30 instead of 4:00. The high and low would most probably still have been the same. Also, if you look at the close only chart of JNPR, it bounces from 79 while the high/low bounces from 76. If you were only looking at the close only chart, you would be tempted to put a stop at 78 and possibly hit it sooner than where the real support was (~75).
Also, candlesticks put a lot of weight on the length of the "shadows" - they give a lot of importance to the high and lows. I think the reasoning is similar.
Besides, someday we may actually get 24 hour markets - the only prices that will mean anything then are the highs and lows. Already one doesn't know which closing price to consider - the 4:00 stock market close or the later after hours close . . .
Just my thoughts - would be interested to hear what you find out. |
