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Strategies & Market Trends : Candlestick Charting--The unknown indicator -- Ignore unavailable to you. Want to Upgrade?

To: MonsieurGonzo who wrote (751)	11/24/1997 12:50:00 PM
From: Tom L. French	Read Replies (1) \| Respond to of 1589

Steve Re AMZN. Not sure I agree or am confident enough with candles to trade like that. First, I do agree with the concept of moving quickly intraday when you see confirmation, because candlesticks often indicate VERY short term changes, and you've got to get in intraday or you miss most--a lot--too much of the move. BUT, I find that very frequently these signals fail or don't really follow through on the confirmation, hence the tentative language "a shift may be occuring, the bears may be regaining control", etc. I made a habit when reading Nison of looking at other candlesticks in his examples, and found there were frequently many other signals appearing to indicate other shifts in the same security/commodity, but which didn't materialize. I said to myself, man I must be missing something here! I better study harder! How does this guy always pick the ones that follow through...unless (and my skeptical side speaks up) it's the convenience of examples, and in the real world these signals don't actually have very high reliability. In fact, if you look at Morris's book "Candlepower", his study shows a very low level of reliability (depending, of course, on what your standards are). He also found that some formations are much more reliable than others. Take, for example, DO on 11/14. On the day chart, a nice strong hammer-like candle appears (it's not technically a hammer because the high is slightly higher that the open) and forms a tweezers bottom formation with the day before... pretty strong indication of a reversal, even if short term, right? The next day opens higher and trades higher still, and if your finger is on the trigger, you might say AH HAH! Confirmation! But then it fades and forms a black candle that is somewhat dark cloud-like. And, of course, the selling resumes. Also, there is what looks like confirmation from short term stochastics which cross over under 20 and turn up, but not from volume or any short term trend line being broken. What is your take on this issue and/or example? Regards, TomLF