Technical Stock-Picking: Candle Charts Can Light Your Way

This technical analysis-based assignment was written by Stockpickr member Ira Krakow.

Candle charts, also known as Japanese candlestick charts, have an old and venerated history, particularly in the Far East. According to a Japanese urban legend, candlestick charts were invented by Homma Munehisa, an 18th century rice merchant who traded in the Ojima Rice Market in Osaka. Legend has it that he was successful in 100 out of 100 trades.

With such a track record, candle charts developed quite a following, particularly among futures traders. Candle charts are now so widely used by stock traders and investors alike that most charting software can display them. So what's the big deal with these candlesticks?

Both the commonly used open-high-low-close (OHLC) charts and candlestick charts display the same price data. However, candle charts give you a much clearer picture of the stock's price action. ...