Japanese Candlestick Sheds Little Light

This column was originally published on RealMoney on Oct. 18 at 1:32 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Japanese candlesticks are simple charts for trading that were popularized in the book Japanese Candlestick Charting Techniques by Steve Nison.

According to supposedly ancient Japanese techniques for commodity trading, they are usually very short, visual patterns that when seen in the markets are either bullish or bearish, depending on the mythology for that pattern.

I decided to test one of the more bullish patterns: the Morning Star. It's a three-day pattern that occurs when a stock has had a large down movement, followed by a gap down open but then a higher close, followed by a large up day. ...