Technical Stock-Picking: Candle Charts Can Light Your Way
02/08/08 - 05:19 PM EST
Stockpickr Staff
Your Candlestick Chart Assignment
This week, your assignment is to refine the timing technique of using Bollinger Bands (see "Technical Stock-Picking: How to Bet on Bollinger Bands"). The task: Find the exact time to buy or sell a stock based on its candlestick chart pattern. Step 1. On Stockpickr, create a portfolio called "Candlestick Chart Trades: [Your Stockpickr Username]." (To create a portfolio on Stockpickr, you'll need to first log-in. If you're currently not a Stockpickr member, you can register at www.stockpickr.com/register). Step 2. Pick five stocks you are interested in buying or selling. Then go to your favorite charting software, such as BigCharts.com's Interactive charting software, which does a great job with intraday charts, plot an intraday, or one day, chart of your stocks, with a 15-minute interval. Can you spot the uptrends and downtrends in price? Can you see the trend reversals? Pick the right time to buy or sell. Check out volume
as well -- a move on heavier than average volume makes the buy or sell signal even stronger.
Document the times and prices for your trades in the "Reason?" box for each stock. At the end of the day, did you buy at the lowest point?
Step 3. The next day, repeat step 2, but use a five-minute interval, which will give you 12 candles per hour instead of four. You should get more buy and sell signals, although some of them may be false. Again, pick the time to buy or sell and document in "Reason?" box.
Was your timing better than yesterday?
Step 4. To hone your skills, repeat steps 2 and 3 for the following two trading days.
Appendix: How to Create Candle Charts
A Web site that support candle charts is BigCharts.com. At BigChart.com, to create an intraday candle chart, with a candle produced at 15-minute intervals, do the following:
1. Enter the stock ticker. Then click the "Interactive Chart" button.
2. Under "Chart Options," select the "1 day" time period and the "15-Minute" interval. To generate additional candles, you can also select the "5-Minute" and "1-Minute" intervals .
3. Under "Price Display," select "Candlestick."
4. To store the chart settings, click "Store Current Settings."
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