In my Sept. 20
column, I requested feedback in three areas:
(no, I never did hear back from them), candlestick books and money managers who'd own up and claim to use primarily TA.
Indigo, I think we can pretty much put to rest. If you haven't read it, see my follow-up
column of Sept. 27.
On Wednesday, we had a few folks who were willing to put their market acumen on the line and dare to be measured! Good, I like that.
Today, your thoughts on both candlesticks and TA money managers. After these three columns, I know I learned a lot. Hope you did, too.
But first, this note: I put these columns together because the combined knowledge of the
readership is immense. Candlestick books? As I mentioned, I had never read one, but now all you need is this column for a variety of good books and sites.
You see, the area of TA is broad and deep. My area of "expertise," if you will, is charting. But, by no means is that the be-all, end-all of TA. No, there are candlesticks, point and figure, Elliot waves, Gann and a variety of areas too numerous to mention. All have their disciples and detractors. But only by continually learning what works and what doesn't will you evolve and hone your own specific method. And that, folks, is what this column is all about. (Well, that and more than you ever wanted to know about my personal life!)
The first candlestick book I read was Steve Nison's
Japanese Candlestick Charting Techniques
. I have since read his second book on candlesticks,
The first book is a primer on the technique. It is an easy, well-written read. Both have many excellent illustrations. He explains how candlesticks are superior to Western charting when it comes to illustrating momentum. He makes it almost immediately clear how richly candlesticks function as a graphic image with the wick length, the color of the body and the patterns of consecutive intervals (days, weeks, months). The second book compares and contrasts Western technical analysis with candlesticks. Nison also enjoys the Japanese whimsy in names of key patterns, e.g., hanging man, abandoned baby. I rely on candlesticks to make trading, especially timing, decisions. I am especially fond of their ability to indicate reversals. I do combine trend lines and resistance/support theory with the reversal patterns (the two named above are especially powerful). I have even had some success writing formulae in Windows On Wall Street Pro for screening. I am aware of software packages available (Samurai?) but have not used any. If you or your readers wanted to learn more, I would recommend both Nison books in the order written. I believe anyone interested in technical analysis will find candlesticks useful. I would love to be part of a candlestick chat group/forum, especially one that traded ideas for writing formulae that express some of the patterns. -- Steven H. Stumpf
Japanese Candlestick Charting Techniques
somewhat overstates the importance of single candles and two- or three-day candle patterns (with a couple of very nice exceptions). I suggest that anyone using candles use them as part of a confluence of indication. In other words, combine what candles are saying with moving averages, support and resistance lines and traditional patterns, then trade when they all (or nearly all) line up in agreement. -- Quentin Bomgardner
You will no doubt receive information about the two books written by Steve Nison.
may not be aware that Steve teaches a course on the subject at the New York Institute of Finance ( www.nyif.com). Greg Morris of www.murphymorris.com has written a book on the subject as well. There is also Tim Ord, who I believe is a futures trader and has written extensively on the subject through his newsletter,
The Ord Oracle
. Finally, your readers may be interested to know that there will be the annual TAG conference for traders held this year in Las Vegas. The Web site is www.ino.com/tag, and I am sure that if you review the speaker list, you'll find the subject of candlesticks being discussed. -- David Guest
I am currently trying to study Gregory Morris'
Candlestick Charting Explained
, but unfortunately I haven't made it past page 40. Each commentary in the book takes quite some brain power to digest, although the author tries to tell you it is really easy. However, I do use the simple candlestick lines, such as shooting star and doji, in my stock analysis, but just to add to volume and other indicators. -- Karin Pereira
There is a fairly decent description of candle patterns at the Equis site ( www.equis.com). I like candle charts because of their quick short-trend identification. I tend to like, and can very quickly see, a stock that's stacked white candles for the last couple of weeks. The only candle I use to clue me in is an engulfing candle that can signal a reversal where there has been a longer period move. And even that is iffy. Also, the Equis site has the complete text of a book on charting that is quite nice for the starting technician to browse. -- Ken Prevo
Try this link: www.litwick.com. -- Suwattana Wongtereo
You might check this out if you haven't been there before: www.bigeasyinvestor.com. They have something called the "candlestick guru," which I think is fantastic. You click on a pattern and it gives you an explanation. -- Doug Danks
On the topic of TA money managers, I have to say I was disappointed, but not surprised. However, a few candidates did emerge:
Robert Deel is a portfolio manager for Strategic Management Decisions, a private money management firm. You can obtain information about him from his Web site: www.tradingschool.com or reading his book,
Trading the Plan
. He is excellent at TA and he is the one who taught me technical analysis. I would never trade without technical analysis again. EVER! -- Joanne Magill
Our firm, Dorsey Wright & Associates, has a money management subsidiary, Dorsey, Wright Money Management, that specializes in using technical analysis as its main focus for portfolio management decisions. Our two money managers are Mike Moody and Harold Parker, and they are two of the best technicians I know. Just thought you would be interested in knowing that there is at least one money management firm that uses TA out of the closet! -- Susan Morrison
OK, that's a wrap. To all those who helped me put these columns together, a big thank you!
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at
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