Pivot Points and Candlesticks Trading Strategy

Augmenting pivot point analysis with candlestick formations helps determine potential turning points in the forex market.

BY JOHN PERSON

Trade setups confirmed by independent techniques or tools — or those that occur simultaneously on different time frames — naturally carry more weight than those signaled by a single input. The trade examples outlined here combine pivot points with candlestick patterns to better pinpoint forex trade opportunities.

Pivot point analysis is based on mathematical calculations used to determine future support and resistance levels. The pivot point value is derived from the high, low and closing prices of the previous price bar, and is then added to and subtracted from the previous bar’s reference points to determine support and resistance levels for future trading. The pivot point (PP) formula is:

1. PP = (H + L + C)/3
2. First resistance level (R1) = (PP*2) - L
3. Second resistance level (R2) = PP + (H - L)
4. First support level (S1) = (PP*2) - H
5. Second support level (S2) = PP - (H - L)

There is some debate about which value should be used for the closing price in the virtually 24-hour forex market. In forex, all trades must be settled within two business days, which is established at the close of banking business at 5 p.m. ET. As a result, this is the time typically used for the closing price.


Using pivot points

Some traders use the pivot numbers to estimate the upcoming high or low, or to simply identify a level at which a market might change direction on an intraday basis.
A popular pivot-point approach is to cover any short positions and go long at either of the two support levels, or sell any long positions and go short at the projected resistance levels. Accordingly, while these price levels provide points at which to enter or exit the market, they also indicate where not to make trades. For example, you should not buy just below either of the resistance levels.
It is beneficial to use multiple time frames — e.g., monthly, weekly, and daily — to identify multiple pivot point support and resistance levels. A particular level has more significance when pivot points on two or more time frames coincide.
Combing pivot point levels with the price moves implied by candlestick patterns improves your odds of identifying favorable trade points.


Candlesticks

The components of a candlestick are derived from the same open, high, low, and close data that make up standard bar charts. The main component we are concerned with here is the relationship between the open and close of a session, which is called the candle’s “body” or “real body.” The color of a candlestick does not indicate whether it closed higher or lower than the preceding candle; rather, it reflects where the candle closed relative to the open.
In Figure 1, the trading period’s high and low are represented by the highest and lowest points of the candlestick, while the session’s open and close are represented by the top and bottom of the wider part of the candlestick. The thin lines at the tops and bottoms are called “shadows” (or wicks), and the wider parts are the real bodies. The candle is typically white (or hollow, or green) if the close was above the open and black (or red) if the close was below the open. Candle A closed higher than the open and candle B closed below the open. Candle C closed above the open — the open was the low price of the day, and the close was the high price of the day. Candle D illustrates the opposite condition. Finally, candle E opened and closed at the same price and is identical to its bar-chart equivalent.


Doji-based patterns: Indecision and reversal

Candlesticks are designed to make bullish and bearish momentum more evident on a price chart. This can highlight certain patterns, such as the high-close doji, that help determine a change in market direction or reversal.
A doji is a candle that opens and closes at (or very near) the same price — look again at Candle E in Figure 1. Such candles indicate indecision or uncertainty. Both buyers and sellers have lost confidence from the time the market opens, as price has pushed both higher and lower, only to end up where it started. Indecision is the last thing you want to see in a trending market. Rejection or failure from a high or low is a sign potential changes in the market are on the horizon.
In a strong downtrend, a market will usually close near its low as highly-capitalized traders hold or add to short positions overnight. If these bigmoney traders are not confident the market will close lower, the market may have the tendency to close back near the open.
Dojis sometimes appear as part of more reliable two- and three-candle formations, such as the morning star pattern, that highlight reversals. The basic morning star is a three-candle, bottom reversal pattern. When the pattern’s middle candle is a doji, it is called a morning doji star, as shown in Figure 2.
The first candle has a long, black real body (a lower close than open); the second candle has a small body that gaps below the first candle’s body. The third candle is a white candle (a higher close than open), and closes above the midpoint of the first candle’s real body. The third candle’s body may sometimes gap higher than the second candle’s body, as is the case in Figure 2.
There are several variations to this textbook description. For example, the initial black candle might have a small real body and the real body of the long white candle might entirely engulf the long dark candle or simply just partially penetrate its real body. The most important thing to notice is what happens after the doji candle. A candle after a doji that closes above the doji’s high confirms a directional change has occurred.

When either a morning doji star or simply a doji develops after a downtrend — especially if it is near an important target, such as a pivot point support level — it is likely if the next candle closes above the doji’s high, a reversal of the recent trend will occur. To trigger an entry, it is important for price to close above the doji’s high. This confirms the breakout and positive momentum should develop within a few bars.


Trade examples: Combining pivots and dojis

Lining up the pivot points on your screen before the beginning of a trading session prepares you for when a setup like a doji or morning doji star pattern develops.
Figure 3 is a 15-minute chart of the Euro/U.S. dollar rate (EUR/USD). On Dec. 10 (a Friday) the high was 1.3318, the low was 1.3148, and the close was 1.3241. The resulting pivot point levels for the following trading day (Dec. 13) are:

Pivot Point = 1.3236
R2 = 1.3406
R1 = 1.3323
S1 = 1.3153
S2 = 1.3066

On Dec. 13 the high turned out to be 1.3325, the low was 1.3192, and the close was 1.3313. The market did not precisely hit the S1 target number, but the low occurred almost exactly at the midpoint (1.3194) of the pivot point (1.3236) and S1 (1.3153). In a bullish market, the market will often hold between the S1 and the pivot point. It is at this price level you should look for setups such as the doji.


Figure 4 is a five-minute chart of the December 2004 EuroFx futures contract (ECZ04) from Nov. 16. Note that once the candle closes above the second doji candle’s high (see the green arrows), price has clearly changed direction.
This chart also provides a good example of how the market reacts near pivot point levels. On the previous day (Nov. 15), the high was 1.2999, the low was 1.2916, and the close was 1.2943. The pivot point was 1.2953 and the support and resistance levels were: R1 = 1.2989; R2 = 1.3036; S1 = 1.2906; and S2 = 1.2870. The high on Nov. 16 was 1.2996, the low was 1.2920, and the market closed at 1.2966.
There were two opportunities to trade from the long side using the doji method. The first doji, which made the low of the day (the first green arrow), was a morning doji star pattern. It formed below the daily pivot point. Notice that once the market closed above the doji’s high it triggered a long position. This up move stalled around the R1 level at 1.2989. (Also notice a doji appeared immediately after the high, and the market proceeded to trade lower.)


Trade management

A risk-control strategy to accompany this pattern might include placing a stop-loss order below the doji’s low by an amount that is 120 percent of the 10-day average range. You could also use a stop-close-only order (which is triggered only on the market close) below the doji’s low for the time period you are trading in.


All time frames

This method is applicable to both the forex market and currency futures, as well as different time frames. (The five-, 15-, 30-, and 60-minute time periods are especially useful in forex trading.) The confluence of trading signals can help identify points at which a market is likely correct or reverse, which is useful for entering trades as well as taking profits.


CURRENCY TRADER • February 2005

Candle Model

There are two important points to trade in financial markets. The first is that you can spend an entire life, trying to explore how it works. The second - that the markets offer great opportunities to earn their money. One of the old methodology, which was used for the analysis of price movements in any market - it is the Japanese candles, and their models. Price action when it is depicted in the graph, using candles, representing the price extremes, and the main range of trade, the model shows that are repeated. These repetitive patterns candle represent excellent opportunities for trade. Many traders are aware of the candle patterns, but they are not inclined to spend time and effort required to remember all the details included in each model.

Last year I spent a lot of time studying and considering the formation of candle patterns to see whether they bring any benefit to my trading. I found that there was a huge pile of books filled with lists of different types of bars and structures associated with candles. Some are very good, while the majority do not represent anything of value to trade. Several models, which I found useful in the real trade, have been extremely valuable. I found that they are easy to recognize and interpret. Points of entry and stop orders are very clear. The only problem for the trader is to find these models. To classify a series of price bars, as a certain candle patterns, should be executed a number of criteria, which include multiple combinations of minima to maxima, discovery against the closure, bull bars bear against the bars, which are all intertwined. Any trader knows that requires an incredible amount of time to see a schedule, to check whether a maximum or above the minimum below the minimum, etc. Needless to say, to remember all the combinations of rules and apply them to find appropriate situations in the graphs. An attempt to find these models at the intra-day charts, and does seem unrealistic. I greatly reduced the list of models, including only the most reliable of them. I have included this model in its trading system to use a very simple method. If, on the basis of its preliminary analysis, I get a message to sales, I am looking for any bear candle model for a good entrance to the short position. If I get a signal to buy, then I am looking for any bychi candle model for 5-minute charts for entry into a long position. You can also use our analysis methods in combination with these candle patterns to help you implement a sound and accurate entry into the market.

So let's look at a brief description of certain candle patterns, which can be viewed in any temporal form.

Forming candle patterns
All the models are well-known features, which represent a good trading opportunity. Models of the most reliable, when they occur at or near the levels of resistance or support Fibonacci. It is best to use candle patterns as signals to the end of the counter-trend movement. This candle can be useful models for any market, especially at vysokopodvizhnyh and highly liquid markets.

Bear candle model
1. Harami Bear - This bear turning model. Prices are rising, when the last bar in the formation stops. The body of the last bar is in the body of the previous bar. The last bar is a bear turning bar. It should be read in the short side, when the price moves below the minimum of the last bar formations. Stop order placed on the maximum level of the last bar model.

Red arrow shows the level of the entrance to the short position, which is below the minimum of the last bar model.
Please note: there are different combinations that constitute the model of "Bear Harami. The body of the bar, which is located inside the bar "Harami", may bear a bar instead of bovine bar used in a graphic example.

2. Confirmed bearish Harami (Three internal bar down) - This model occurs when the bar after the last bar model "Bear Harami confirms disservice model, closing below the closing price of Bear bar 'Harami. The tactics of trade on this model is to go to the short side, when the price moves below the minimum of the last bar of the model. This pattern occurs regularly and is considered the strongest signal to bear than the simple model of "Harami".

The red line indicated the level of the entrance to a short position when the price moves below the minimum confirming bar. Also, please note confirming the bar, which is to close following the closure of the bar 'Harami.

3. Medvezhye absorption - this model is formed, when prices rose, and the last was called to the bar formation GEPom up towards bovine trend, then turns and closes below the main body of the previous bovine bar. This creates a turning bearish bar, which consumes the body of the previous bovine bar. Technique is to go to the short side, when the price moves below the minimum of the last bar, which is a bar sinks. Use the maximum absorption of the bar as a level for placing stop orders. If prices are too far from the level of stop-order, then a closer logical level.

Red arrow to specify the level of the entrance to a short position on the bar below the minimum absorption.

4. Proven Medvezhye absorption (three external bar down) - This model occurs when the bar after the last bar model Bear absorption confirms disservice model, closing below the closing price of the bar Bear absorption. The method of trading is to go to the shortest side, when the price moves below the minimum of the last bar of the model. This model is considered more reliable than Medvezhye absorption.

Red arrow shows the level of the entrance to the short position below the minimum confirming bar.

5. Bear JB - this model occurs when you have three long-running bull bars, each with a higher maximum. The last bar in the formation is unable to reach a maximum of the previous bar and the bar is a bar with a narrow range. The method of trade is to go to the short side, when the price crosses the minimum of the last bar formations. Use the maximum of the last bar as a level for placing stop orders. (Although, it is not sufficiently widespread candle model, I have met many times before you add to your arsenal).

Red arrow to specify the level of the entrance to the short position below the minimum of the last bar model, which is a bear turning bar.

6. Bear left to a child - This is turning model bovine trend. Price increases and then makes the price bar GEO upwards. This bar has made the GEO, a bar with a narrow range. The lower shadow of the bar, making the GEO does not overlap a maximum of the previous bar. Price then in the next bar down, and makes GEO closes below the opening. Technique is to go to the short side, when the price moves below the last bar formations. Maximum last bar formation is used as a level for placing stop orders.

Red arrow to specify the level of the entrance to the short position below the minimum bar, opened with GEPom down.

7. Medvezhye dark cloud - turning this model, which occurs when prices increased. First, you must be a long bull bar. He is accompanied by the bar, which opens with GEPom above the closing price of bovine bar, but then declines at the close to average a point a long bovine bar. The tactics of trade is to go to the short side, when the price moves below the minimum of the last bar formations. Use the maximum of the last bar formation as a level for placing stop orders.

Red arrow shows the level of the entrance to the short position below the minimum turning Bear bar.

8. Medvezhye recent takeover - This is turning model, which is formed when prices rise. Then a bar bovine absorption. Price bar next to the bar is the absorption of bovine bear bar, which closed below the closing bars bovine absorption. This model is the most reliable, if it occurs at the maximum of the last 14 years. The method of trading is to go to the shortest side, when prices move below the minimum of the last bar formations. Maximum last bar is used as a level for placing stop orders.

Red arrow shows the level of the entrance to the short position below the minimum turning Bear bar.

9. Footballer Bear - This model can indicate the prices. It can occur anywhere on the graph, and will signal the spread of the trend. Bear football player is a model consisting of two bars, where the first bar represents a bullish bar. The next bar was called for the same price at which bovine bar opened, but changes direction and rose as bearish bar. Technique is to go to the short side, when the price moves below the minimum of the second bar. Maximum turning bar is the placement of stop-order. This model will be most effective if both bars are not bars with a narrow range.
Red line shows the level of the entrance to the short position below the minimum Bear turning bar and the placement of stop-order. In this example, with a 5-minute schedule, you can see that, depending on your trading style, this deal would be a winning position can be closed by stop-order. For the conservative style is to wait when the price closes below the minimum, before you enter into the market. If you prefer a more aggressive entry price and then turns up, it would be prudent to withdraw from the deal when you reach the level of stop-order and then re-enter the market at the same level.

Bychi candle model
1. Bullish Harami - This is the inverted version of the model "Bear Harami. This model arises when the price falls and then the last bar stopped and can not

to overcome the closure of the previous Bear bar. Bar "Harami" closes below the opening of the previous Bear bar. Therefore, the body of the last bar is in the body of the previous Bear bar. Tech trade in this model is to go a long way, when the price crosses the maximum bar "Harami". Place a stop order should be at the level of the minimum bar 'Harami.

Green arrow shows the level of the entrance to a long position above the maximum of the bar 'Harami', and red - the level of placing stop orders below the minimum of the bar. Please note that there are different combinations that constitute a "bullish Harami. The body of the bar, which contains a bar Harami, maybe a bar instead of bovine Bear bar, used in a graphic example.

2. Confirmed bullish Harami (Three internal bar up) - This model occurs when the bar following the formation "bullish Harami" rose above the closing of the bar "Harami". This is a confirmation of bovine Harami, and is a stronger signal. Engineering trade is to go a long way, when the price crosses up past the bar formation. At least the last bar is used as a level for placing stop orders.

3. Byche absorption - This model arises when the price has committed a decrease. The last bar in the formation was called to GEPom down and then rose above the opening of the previous Bear bar, absorbing all of his body. The method of trade in this model is to go a long way, when the price moves above the maximum absorption of bovine bar. Minimum bar uptake is used as a level for placing a protective stop orders.

Green arrow to specify the level of the entrance to a long position above the maximum absorption of the bar. The red line indicates the level of placing stop orders.

4. Proven byche absorption (three external bar up) - When the price is initially formed bovine model of absorption, if the next bar closes above the closing price of the bar bovine absorption, the model confirmed

and this is a more powerful signal than a simple byche absorption. Engineering trade is to go a long way, when the price moves above the maximum of the last bar formations. At least this bar confirmation is used to determine the level placement of stop-order.

Green arrow shows the level of the entrance to a long position above the maximum bar confirmation.

5. Bullish abandoned baby - This is turning model, which is formed when, after the fall of prices, the next price bar doing GEO down. This bar has made the GEO-down, is a bar with a narrow range and does not cross the previous Bear bar. The next bar opens from GEPom up and closed above its opening. Engineering trade is to go a long way, when the price moves above the maximum of the last bar formations. At least the last bar is used as a level for placing stop orders.

Green arrow shows the level of the entrance to a long position or closing above the maximum of the bar, made up of GEO.

6. Byche recent takeover - This is turning model, which occurs when, after the price dropped to a new level, it forms a bar Bear absorption. Bar, following this bar Bear absorption turns up and rose above the closing price of the bar Bear absorption. If this happens to 14-periodnom minimum, it increases the reliability of the model. Engineering trade is to go a long way, when the price moves above the maximum of the last bar formations. At least the last bar is used as a level for placing stop orders.

Price formed a bar Bear absorption, but the next bar turned and closed above the closing bars Bear absorption. Green arrow to specify the level of the entrance to a long position above the maximum turning bar.

7. Bovine footballer - turning this model occurs when the first bar formation is the bear bar. The second bar opens at the same level as the first bar, but moves in the opposite direction, rose as turning bullish bar. The method of trade in this model is to go a long way, when the price moves above the maximum of the second bar. This model would be more effective if both bars are not bars with a narrow range.

Green line shows the level of the entrance to a long position above the maximum turning bar. The red line indicates the level of placing stop orders.

Forex Magazine
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Japanese candles, and resistance levels

To confirm the levels of resistance can be used separate candles and candle patterns. This may be a new level of resistance after prolonged or improve existing levels of resistance, confirmed in a commercial range. In the commercial range of candles can help determine the entry point to sell or buy some resistance near the support. Below is a list of some but not all candles and candle patterns that can be used to identify or confirm the levels of resistance. Bear turning the model are marked (R).

"Medvezhye uptake (R)
"Bear" harami "(R)
"The smoke of dark clouds" (R)
"" Dozhi (normal, leggy, tombstone)
"" Evening Star "or bear" Abandoned child "(R)
"Hanged" (R)
"A long black candle or black marabozu"
"" Falling Star "(R)
"" Top "
"Three Black Crows" (R)

Bear turning candles and candle patterns suggest that the pressure of the buyers were suddenly overcome selling pressure and has to prevail. Such a rapid shift indicates an excess of proposals and the possibility of the formation of resistance.

"Hanged", a long black candle and the black marabozu shows the increasing pressure of sellers rather than the actual turn. After a long lower shadow "hanging" points to the intra-session selling pressure, which by the end of the session has been overcome. Even though the market closed above the tool its minimum, the ability of sellers to maintain prices below are in doubt. A long black candle and the black marabozu show supported by the pressure of sellers, which allow you to move the price down from beginning to end. Such intense pressure on the weak signals of sellers and buyers' resistance level can be set. "Dozhi" and "top" shows indecision and generally considered to be neutral. These nerazvorotnye models indicate a reduced pressure of shopping, but also a slight increase in sales. To continue improving, new buyers should be willing to pay higher prices. As the "top" and "dozhi, tie shows a lack of confidence among buyers and the possibility of the formation of resistance.

In late May, Veritas (VRTS) has risen from 90 to 140 in about two weeks. The final leap occurred with GEPom and two "dozhi. These "dozhi" signaled the sudden confusion among buyers and sellers, and subsequently formed the level of resistance. Once the resistance was tested in mid-June, created another "dozhi, indicating that buyers do not have enough confidence. This led to a decline and subsequent recovery in early July. Increased share of the lead 105 to 140, which created another "dozhi" Affirming the resistance level set in early June.

Lucent (LU) traded in a range, limited levels of 65 and 52, for about 4 months. Resistance was first identified in late April, "shooting star" and "a veil of dark clouds." Both of these bear were confirmed GEPom turn down two days later, and testing support at 52. Once the action closer to the support of 52, began to form a candle with a long lower shadow and has a turn at the end of May. After a sharp rise, the movement was met with resistance and the other "a veil of dark clouds" formed from the resistance at the beginning of June. Buyers clearly lacked confidence near 65, and sellers eager to sell their shares. Final testing of the resistance occurred in mid-July. After one break above 65, the action unfolded and closed back below 65. The rest is - history.

After the spring increasing the DAL first found resistance at 57 in early April with a "shooting star" in the top. The action has sharply declined, but returned again to test the resistance at 57 in May. In May, near a cluster of resistance was a "shooting star", "tops" and leggy "dozhi. What happened decline below the 56 confirmed Medvezhye movement and action tested support in the area 50. After another raise to 57, the action, it seemed, was on the verge of a breakthrough. However, the formation of a small white candle in the middle of July (black circle). GEO-up may have been positive, but pointed to the lack of continuing uncertainty about buyers. Further down, formed a disservice GEO "evening star" and the campaign has fallen back again to the level of support.

Forex Magazine
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Candle Model Bullish Turn

There are many models of Bull candle turn. In this paper selected the most popular models for a detailed explanation. Here are some of the key models of bovine turn. In parentheses indicate the number of candles.

"Byche absorption (2)
"Model of the penetration (2)
"Bullish" Harami "(2)
"" Hammer "(1)
"Inverted" Hammer "(1)
"Morning Star" (3)
"Bullish" abandoned child "(3)

"Hammer" and inverted "Hammer" were discussed in the article "Introduction to Japanese Candles, Part 3." This article will be reviewed by the other six models.
Before turning to the individual models should underline some general principles inherent in virtually all models:

"Most models require bovine confirmation.
"Models of bovine turn should be established at the time of the downward trend." There should also be used by other aspects of technical analysis.

Byche confirmation
Models may be formed with one or more candles, most models require bovine confirmation. In fact, turn shows that buyers overcame the pressure of sellers, but still not clear whether the new buyers offer higher prices. Without confirmation, these models are considered neutral and merely indicate, at best, the potential level of support. Byche confirmation means further upward movement may take place in the form of GEPa, long white candles, or raise with a large volume. As the candle model of short-term and usually effective for only 1 or 2 weeks, byche confirmation should occur within 1 -3 days after the formation of a model (for a daily schedule).

The current top-down trend
To be considered as the model turns bullish, must be an existing trend to turn down. Byche absorption in the new maximum is hardly a model of bovine turn. These formations indicate the continuing pressure from customers and may be regarded as a model to continue. In the example of "Ciena" below, the model in the red oval looks like a byche absorption, but the model was formed after improving by about 30 points in the vicinity of soprtivleniya. The model indeed shows the power, but more likely to continue in this place than the model of turn.

The existence of the downward trend can be determined using the moving averages, the analysis of vertex / foundation or trend lines. Market-based instruments can be located in the top-down trend, based on one of the following criteria:
"Market-based instruments traded below its 20-day exponential moving average (EMA).
"Each peak in the back and the subsequent minimum is lower than the previous ones.
"Market-based instruments traded below its trend line.

This is only examples of possible approaches for determining the downward trend. Some traders may prefer a shorter top-down trends and to consider market-based instruments below the 10-day EMA. Determination of criteria depends on trading style and personal preferences.

Other aspects of technical analysis
Candles provide an excellent criterion for determining the short-turn, but they should not be used separately. Other aspects of technical analysis can and should be incorporated to improve reliability in the identification of a turn. Below is three possible approaches, both traditional technical analysis can be combined with an analysis of candles.

Support: Look for bychi Facing near the levels of support to improve reliability. Levels of support can be determined using the moving averages, previous bottom with rollback, trend lines and Fibonacci levels.

"Juniper Networks" (JNPR) rose from 75 to 175 in less than two months. The action has adjusted to approximately 50% of the increase in 100 settlements and formed a large model of bovine uptake in the region of 125. This model has been confirmed in two subsequent increases above a downward trend line.

Pulse: Use oscillators to confirm the growing momentum in conjunction with bovine turn. The positive divergence in MACD, PPO, Stochastics, RSI, StochRSI or Williams% R will indicate on the improvement of the momentum and increase the reliability of the model bovine a turn.

Money Flows: Use volume-based indicators to determine the pressure of buyers or sellers. The balance of the volume (OBV), Chaikin money flow (CMF) and the line of accumulation / distribution can be used in combination with candles. Increasing any of them will improve the reliability of a turn.

For those who want to go further, all three aspects may be combined for the final signal. Looking for a turn in the bovine model of candles near the level of support with a positive divergence, and signs of pressure buyers.

A lot of the signals together to "Compaq" (CPQ) in early July. After a sharp decline at the end of June, the event has formed a number of "tops" some support at around 25. Bull model of absorption, was formed in early July and was confirmed three days later, a strong increase above 27. 10-day slow Stochastic oscillator formed a positive divergence, and moved above its pulse line just before a stock has risen above 27. Although not in the green, but CMF showed constant improvement and progress in the positive territory a week later.

Byche absorption
Model bovine absorption consists of two candles, the first black and white second. The size of the black candle is not so important, but it should not be "dozhi" that it would be relatively easy to absorb. The second should be a long white candle - than it is, the more it looks like bovine. White body to completely absorb the body of the first black candles. Ideally, though not necessarily to the white body covered also shadows. While the shadows and settled, but they usually are either small or absent at the two candles.

After reduction, the second white candle begins to take shape when the pressure forcing sellers market tool to open below the previous closing. Customers come into the game after the opening and pushed prices higher than the previous opening for a strong conclusion and the potential short-turn. Generally, the greater the white candle and more absorption, so more than bovine is turning. Further efforts are needed to ensure customers bovine confirm that turning the model.

In January of 2000., "Sun Microsystems" (SUNW) has formed a couple of models of bovine absorption, which presaged two significant increases. The first was formed in early January after a sharp decline, which increased its share significantly below the 20-day exponential moving average (EMA). Immediate GEO-up confirmed the model as a bull and share climbed up by mid-eightieth figures. After correction to the level of support, was formed in late January, the second model bovine absorption. The action fell below its 20-day EMA and found support at the level of his earlier GEPa. This is also consistent with the correction in the 2 / 3 of the previous raise. Model bovine absorption was formed and was confirmed the next day followed by a strong increase.

Model infiltration
Infiltration model consists of two candles, the first black and white second. Both candles must have a fairly large body, and usually, but not necessarily, small or missing shadows. The white candle should open below the previous closing, and closed above the middle of the body
black candle. Closing below may qualify as a mid-turn, but will not look like enough to bychi.

Also, as with the bovine model of absorption, the pressure is forcing sellers market tool to open below the previous closing, indicating that sellers still prevail after the opening. However, after the opening of the buyers come into the game to move the price up - it will close above the mid-body of the previous black candle. Further efforts to ensure the buyers bovine confirm this model of turn.

In late March and early April 2000. "Ciena" (CIEN) fell from above 80 to about 40. The action initially touched 40 in early April, the long lower shadow. After a strong decline in mid-April event tested support in the region of 40 and re-established model of penetration. Infiltration model was well confirmed by the next day, a strong increase above 50. Even if that was a setback after the confirmation of the action remained above support and has risen above 70. Also pay attention to the model dozhi Morning Star "at the end of May.

Byche "Harami"
Byche "Harami" is composed of two candles. The first is the body and the second a small body, which is entirely located inside the first. There are four possible combinations: white / white, white / black, black / white and black / black candles. Are they models of bovine or Bear turn, all the "Harami" look the same. Their bullish or bearish nature depends on the previous trend. Models "Harami" considered to be potential bychimi a turn after the decline and potential bear after the turn raise. Whatever the color of the first candle, the less the body of the second candle, the more likely a turn. If a small candle is "dozhi, the probability of turn increases.

In his book "Beyond the Candles", Steve Nison asserts that any combination of colors can form a "Harami", but most bychimi are combinations of white / black or white / white candles. As the first candle has a great body, it implies that the model of bovine turn will secure, if the body is white. A long white candle shows the sudden burst of pressure and supported by customers. A small candle then points to the consolidation. Bychi "Harami" with white / white and white / black candles probably occur less frequently than with the black / black or black / white candles.

After the reduction, combined with the black / black or black / white candles may still be regarded as a bullish "Harami". The first long black candle signals that there remains considerable pressure sellers and may indicate a capitulation. A small candle that is formed along with GEPom at the opening points to a sudden increase in pressure and potential buyers turn.

"Micromuse" (MUSE) has fallen by mid-sixtieth figures in April 2000. and start trading in the range, limited levels of 65 and 100 in the next few weeks. After 6 days ago to reduce the level of support at the end of May, was formed bullish "Harami" (red oval). On the first day, was formed long white candle, and the second a small black candle, which could be classified as "dozhi. Raising the next day provided byche confirmation of sale and subsequently grew to about 150.

Hammer
"Hammer" consists of a single candle, white or black, with a small body, long lower shadow and small or no upper shadow. The size of the shadow to the bottom at least twice the length of the body and the range of maximum / minimum must be relatively large (on the range last 10-20 candles). After reduction, the bottom of "the hammer", indicating that the pressure remains sellers. However, a strong closing indicates that buyers are beginning to once again become active. Further efforts of buyers to ensure byche confirm the model of turn.

Nike (NKE) fell from the bottom fiftieth figures until mid-thirtieth figures before found support at the end of February. After a short recovery, the action fell back to the level of support in mid March and formed a "hammer". Byche confirmation occurred two days after a strong increase.


Morning Star
"Morning Star" consists of three candles:
1.Dlinnoy black candle.
2.Malenkoy white or black candle, which was formed with GEPom following the closure of the previous candle. This candle can also be "dozhi, in this case the model will be" morning dozhiz everywhere. "
3.Dlinnoy white candle.

The black candle confirms that the reduction remains in force, and sales are dominated. When the second candle opens with GEPom down, then this confirms further pressure sellers. However, after GEPa, the decline ceases or slows considerably, and a small candle. Small candle indicates indecision and a possible counter-trend. If a small candle is "dozhi, the probability of turn increases. The third long white candle byche provides confirmation of a turn.

After reduction of the level above 180 to below 120, Broadcom (BRCM) has formed a "dozhi morning star" and then rose above 160 in the next three days. This is a strong model of a turn and did not require further confirmation in addition to bovine third long white candles. After above 160, followed by a two-week correction action and formed a model of "penetration" (red arrow), which was confirmed by a large GEPom up.


Bovine "abandoned child"
Bovine "abandoned child" reminds "dozhi morning star and also consists of three candles:
1.Dlinnoy black candle.
2.Dozhi formed with a minimum GEPom below the previous candle.
3.Dlinnoy white candle formed with a higher maximum GEPom "dozhi.

The main difference between the "morning star dozhi and bovine" abandoned child "is GEPe from both sides of the" dozhi. The first GEO-down signals that the pressure remains strong sellers. However, the pressure eased and sellers closing market instruments occurs at or near the opening, creating a "dozhi. After dozhi, GEO-up and long white candle indicates the strong pressure of the buyers and the formation of a turn is completed. Further byche confirmation is not required.

In April, Genzyme (GENZ) fell below its 20-day EMA and has begun to find support in the thirtieth nizah figures. Action start forming the bottom since 17 April, but turning the model was only in late May. Bovine "abandoned child" emerged from a long black candle, "dozhi and long white candle. GEPy on both sides "dozhi" enhanced reliability bovine turn.

Arthur Hill
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