As of 10/07/2024
Indus: 41,954 -398.51 -0.9%
Trans: 15,783 -31.37 -0.2%
Utils: 1,027 -24.05 -2.3%
Nasdaq: 17,924 -213.95 -1.2%
S&P 500: 5,696 -55.13 -1.0%
|
YTD
+11.3%
-0.7%
+16.5%
+19.4%
+19.4%
|
43,500 or 41,600 by 10/15/2024
16,800 or 15,700 by 10/15/2024
1,125 or 1,025 by 10/15/2024
19,000 or 17,600 by 10/15/2024
5,900 or 5,600 by 10/15/2024
|
As of 10/07/2024
Indus: 41,954 -398.51 -0.9%
Trans: 15,783 -31.37 -0.2%
Utils: 1,027 -24.05 -2.3%
Nasdaq: 17,924 -213.95 -1.2%
S&P 500: 5,696 -55.13 -1.0%
|
YTD
+11.3%
-0.7%
+16.5%
+19.4%
+19.4%
| |
43,500 or 41,600 by 10/15/2024
16,800 or 15,700 by 10/15/2024
1,125 or 1,025 by 10/15/2024
19,000 or 17,600 by 10/15/2024
5,900 or 5,600 by 10/15/2024
| ||
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Unusually tall price bars appear at the top of minor highs and at the bottom of minor lows. Additional research suggests that when a tall candle appears in a trend, between 67% and 72% of the time a reversal occurs within a day.
I used 466 stocks of daily price data covering dates starting from November 18, 1999 to February 21, 2007, encompassing both bull and bear markets. I found all peaks at least 5 days apart and all valleys at least 5 days apart. Then I compared the height of the price bar at the peak/valley with the prior 5-day average height.
In the figure to the right, the arrows points to minor highs or minor lows that have a price bar (candle) taller than the preceding 5-day average.
Notice how price often turns within a day of the tall candle.
In a manner similar to the above methodology, I found all candlesticks that were taller than the 146% median for tall candles (the 146% value comes from the above testing. I found the height for candles taller than the 5-day average and then used the median height of those tall candles). To check for price trending, I included a simple test to compare today's high price with the high prices of 2 and 3 days ago. This helped to assure the tall candle was at or near a minor high. The prior day was not checked because I wanted to include it in the one-day window (that is, the day before the tall candle could be the peak). In a similar manner, I checked the low price of days 2 and 3 before the tall candle to make sure the tall candle had the lowest low and skipped the prior day.
I compared the tall candle signal with a minor high separated from other highs by at least 2 days or a minor low separated from other lows by at least 2 days.
The test used data from 466 stocks beginning from approximately 10/20/1999 to February 22, 2007, encompassing both bull and bear markets. I used a 22 day average of the daily high-low range to determine whether a candle was at least as tall as 146% of the average. The 22 day (1 month of trading) average results in the best performance of 3-5, 10, and 22 day periods. If so, then I looked to see if a minor low or minor high was nearby (no more than 1 day away, either before, during or after the tall candle).
If you see an unusually tall candle...
For example, the above figure shows all of the signals indicating tall candles at minor highs (down arrows) and minor lows (up arrows). Red candles are the mistakes. Remember that the signals are valid from one day before to one day after the tall candle.
-- Thomas Bulkowski
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