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I am a collector of first editions of books. My specialties include astronomy texts written before 1900, such as Percival Lowell's classic Mars, thefirst published speculations about the possibility of life on the red planet(which inspired Jules Verne to write The War of the Worlds), and a strangelittle tome from 1852 that claims astronomer William Hershel spottedsheep on the Moon with his telescope.My collection also includes about 200 business books written by authors I have interviewed through the years. My inscribed copy of IvanBoesky's Merger Mania, for example, was appraised a few years ago at$200.But my sentimental favorite is a beat-up old chart book of the DowJones Industrials and Transportations Averages going back to December18, 1896, the day the modern Dow Jones averages were born. (Triviaquestion: Where did the Dow Industrials close after its very first day oftrading? Answer: 38.59.) Back then, the Industrials only had 12 components, and the Transports, with 20 issues, were known as the Rails.A 90-year-old FNN viewer from Virginia offered it to me in the fall of1985."I have been interested in, but not too active in, the market since theearly '20's," he wrote, "and lived through the '29 'break' and the great
Foreworddepression which was a 'tempering' influence against excessive enthusiasm."At age 90 my activities are confined to 'growth' stocks and safeinvestments. I am no longer interested in 'speculation.'" So he wondered ifI would be interested in his chart book.Indeed, I was. I gladly accepted in exchange for a signed copy of oneof Joe Granville's books.The book was published in 1931 by Robert Rhea, the famed disciple ofCharles Dow and of the oldest form of technical analysis, the Dow Theory.It covers the years 1896-1948, with each page devoted to one year'strading of both averages.It is one big faded green rectangle, measuring 11 inches high and 18inches across. Its heavy cardboard covers are held together by a couple ofrusty screws.I browse through it once in awhile, marveling at its simplicity. Eachday's closing value is designated by a single horizontal hash mark meticulously notched on the graph paper. Nothing fancy. No intra-day highs andlows, no trendlines, no points or figures; just a simple daily record of thedebits and credits of civilization.There is the market panic in December of 1899, when the Industrialsplunged from 76 to 58 in just 13 trading days.There is the period from July to December of 1914, when, incredibly,the market was closed on account of World War I. Eerily, half the pagedevoted to that year is blank.And, of course, there is 1929, when the Industrials peaked on September 3 at 381.17 and hit bottom, three pages later, in July of 1932 at 41.22.The book means a lot to me. Between its covers there is a bit ofhistory, some mathematics, a dose of economics, and a dash of psychology. It has taught me much about a discipline that I once consideredvoodoo.Good journalists are supposed to maintain an open mind about thestories they cover. Political reporters, for example, should be neither Republican nor Democrat. And successful financial reporters should avoidbeing either bullish or bearish. And they should also be familiar with bothfundamental and technical analysis.
Foreword
I remember the first time I interviewed a technical market analyst inthe fall of 1981, when I was still cutting my teeth on business news. Thisanalyst spoke of 34-day and 54-week market cycles and head-and-shoulderbottoms and wedge formations. I thought it was so much mumbo-jumbountil the summer of '82 when the bull market was launched, and thefundamental analysts were still bemoaning the depths of the recession thatgripped the economy at the time. That was when I realized the techniciansmay have something there.He doesn't know it, but Greg Morris taught me a lot about technicalanalysis. Or, more accurately, his N-Squared software did. For a coupleyears during the mid-80's, I hand-entered the daily NYSE advance/declinereadings and the closing figures of a few market indices into my computer.I used N-Squared to build charts and draw trendlines. (I hadn't yet learnedabout modems and down-loading from databanks.)The slow, painstaking process gave me a hands on, almost organic, feelfor the markets. And watching various repetitive chart patterns unfold onthe computer screen was a great lesson about supply and demand andabout market psychology.I think I understand how technical analysis works. It's the why thatstill puzzles me. I understand the supply and demand implications ofsupport and resistance levels, for example, and I appreciate the theoriesbehind pennant formations and rising bottoms.But I still marvel at what ultimately makes technical analysis work:that intangible something that causes technicians to anthropomorphize themarkets without even realizing it. The market is tired, they say. Or themarket is trying to tell us this or that. Or the market always knows thenews before the newspapers do.That something, in my mind, is simply the human side of the market,which I suggest American technicians tend to ignore. Technical analysisis, after all, as much art as it is science. But too many analysts have amathematical blind spot, and I blame that on computers. Yes, charts represent numerical relationships. But they also depict human perceptionsand behavior.Enter Sakata's Candlesticks, which combine the highly quantitativeratiocination of American technical analysis with the intuitive elegance of
Foreword
Japanese philosophy. Greg Morris has more than ably turned his attentionto this fascinating charting style with this book.It occurs to me that Japanese Candlesticks are the perfect form oftechnical analysis for the '90's. I happen to agree with authors JohnNaisbett and Patricia Aburdene. In their bestseller Megatrends 2000, theywrite that we're headed for the age of spirituality. It won't necessarily bean overtly religious period, mind you, but rather one subtle, intuitivepower we may all develop that allows us to sense things before theyactually happen. It will be a period that embraces a kind of hybrid Easternphilosophy and Western practicality without all the New Age hocus-pocus.Just right for Candlestick analysis. The system is precise and exacting,but it charms with its haiku-like names for chart patterns: "paper umbrella," or "spinning tops," for example.But I'll let Greg Morris tell the story from here. I just hope my90-year old friend is still around to read it. I think he would like it.
Japanese candlestick charting and analysis is definitely a viable and effective tool for stock and commodity market timing and analysis. That is abold statement, especially when you consider the universe of analysistechniques that are being promoted, offered, sold, used, abused, andtouted. Other than Nison's work, the only problem has been the lack ofdetailed information on how to use and identify them. Not only will thisbook solve this problem, but it will also provoke an intellectual curiosityin candlesticks that will not easily disappear.Japanese candlesticks provide visual insight into current market psychology. There is no ancient mystery behind Japanese candlesticks, assome promoters would have you believe. They are, however, a powerfulmethod for analyzing and timing the stock and futures markets. That theyhave been used for hundreds of years only supports that fact. Whencandlesticks are combined with other technical indicators, market timingand trading results can be enhanced considerably.It is almost regretful that this sound analysis technique was introducedto the West using the word "candlesticks" instead of some more appealingor appropriate terminology, such as Sakata's Methods or Sakata's FiveMethods. If candlesticks' Western debut had focused on the uncovering ofan ancient Japanese analysis technique called Sakata's Methods, I believetheir acceptance would have been quicker and more widespread. None of
Prefacethis, however, changes the contribution that candlesticks make to technicalanalysis, only fewer misleading claims would have been made.In January 1992, I completed a week of study in Japan with Mr.Takehiro Hikita, an independent and active futures trader. While staying inhis home, we thoroughly discussed the entire realm of Japanese culturerelated to candlestick analysis. His extensive knowledge and dedication tothe subject made my learning experience not only enjoyable, but quitethorough. His insistence that I try to understand the psychology at thesame time was instrumental in learning many of the pattern concepts. Ihope that I have transposed that priceless information into this book.This is a book that not only covers the basics, but offers more detailinto exactly how to identify and use the patterns. A comprehensive analysis and recognition methodology will be presented so that you will have nodoubt in your mind when you see a candlestick pattern. In addition to athorough coverage of the candlestick patterns, the philosophy of their usewill be discussed so that you will have a complete understanding of Japanese candle pattern analysis and its usefulness to market timing and strategies. Candle patterns need to be defined within parameters that people canunderstand and use in their everyday analysis. This can still involve flexibility as long as the limits of that flexibility are defined, or at least explained.An attempt to take the subjectivity out of Japanese candlesticks analysis will be a primary thrust of this book. Most sources that deal withcandlesticks admit that patterns should be taken into the context of themarket. This is true, but is often an excuse to avoid the complicated methodology of pattern recognition.Chapters on statistical testing and evaluation will reveal, totally, allassumptions used and all details of the testing results. Rigorous testing hasbeen done on stocks, futures, and indices. Some of the results were surprising and some were predictable. All results are shown for your use andperusal.There is nothing more tiring, useless, and inefficient than reading pageafter page of detailed analysis on chart patterns about how the market wasor what you should have done. The seemingly endless verbiage about howyou would have done if you had only recognized this or that when this or
Prefacethat occurred is totally worthless. Charting examples will be shown in thisbook only as learning examples of the candle patterns being discussed. Itdefinitely helps to see the actual candle patterns using real data.I could not have allowed myself even to start a project as involved asthis if I had even the slightest doubt as to the viability and credibility ofusing Japanese candlesticks as an additional tool for market analysis andtiming. Over the last fifteen years, I have read almost every book ontechnical analysis, used every type of indicator, followed numerous analysts, and developed technical and economic analysis software in association with N-Squared Computing. Believe me, if candlesticks were just apassing fancy, this book would not have been considered — certainly not byme.I felt that a straightforward approach in writing the book would be themost accepted, and certainly the most believable. When I buy a book tolearn about a new technique, a textbook-like approach is appreciated.Hence, this style has played a vital part in the structure and organization ofthis book.This book will not only introduce and explain all of the inner workingsof Japanese candlesticks, but will also serve as a reference manual for lateruse. Each candle pattern has been defined and explained in a standardformat so that quick and easy referral is possible. I will introduce a newmethod of analysis called "candlestick filtering," which, based upon myresearch, is essential for better recognition. You will see it gain in popularity because it can provide such a sound basis for future analysis and
research.Japanese candlestick analysis used with other technical/market indicators will improve your performance and understanding of the markets.Even if you use candlesticks solely as a method of displaying data, youwill find them indispensable. Candlestick charting, candle pattern analysis,and candlestick filtering will give you an edge, a tool if you will, that willenhance your understanding of the markets and trading performance.Learn CandlePower, use it, enjoy its rewards.
Greg MorrisDallas, Texas
There are people without whom this book could not have been possible.Where do I start? Who do I mention first? This, quite possibly, is moredifficult than the book itself.One must never forget one's roots. There is no doubt in my mind thatmy parents, Dwight and Mary Morris, are mostly responsible for all thegood that I have ever accomplished. Any of the bad surely had to come
from being a jet fighter pilot in the U.S. Navy for six years.I am blessed with a wonderful wife and children. Their support during
this effort was unwavering and fully appreciated.Norman North (Mr. N-Squared Computing) has gone from a businessassociate to a valued friend. His insight and opinions are always soughtand usually relied upon. The bottom line is this: without Norm, this bookwould not have been written.I am forever grateful to Takehiro Hikita for his gracious offer to visitJapan, stay in his home, and help with the many Japanese interpretations.My trip to Japan in January 1992 to study Japanese candlestick analysis
was invaluable. His knowledge of candle pattern analysis is filteredthroughout this book.I cannot forget the fact that John Bollinger, while at a Market Techni-
cians Association meeting in Phoenix in 1988, said that I should look intocandlesticks. I have; thanks, John.
AcknowledgmentsRon Salter, of Salter Asset Management, has always offered an unusual but insightful opinion on the economy and the markets; one thatusually seems to be more right than wrong. I am grateful for his permission to quote some of his comments from his client letter.Steve Nison must be given full credit and acknowledgment for pioneering "candlesticks" into Western analysis. His book Japanese Candlestick Charting Techniques, published by New York Institute of Finance /Simon & Schuster is a classic and provides the reader with a rich historyof candlesticks and candlestick analysis. Nison coined many of the Englishnames for the various patterns used in the West today.Many of the concepts used in the West today originated from Nison'swork and have been widely accepted as commonplace among candlestickenthusiasts. This book does not try to change that.The first book translated into English about Japanese candlesticks wasThe Japanese Chart of Charts, by Seiki Shimizu. This book provided animmense wealth of information about all of the popular candle patternsalong with their many interpretations. It was translated by Greg Nicholson.Another valuable source of information on candlesticks was publishedby Nippon Technical Analysts Association, called Analysis of Stock Pricesin Japan, 1988.My thanks also go to Commodity Systems, Inc. and Track Data Corp.for the use of their stock and commodity databases.As is the accepted standard, and certainly in this case the fact, whatever factual errors and omissions are sadly, but most certainly, my own.
Japanese candlestick analysis is a valid form of technical analysis andshould be treated as such. Promoters of instant wealth will always misdirect and abuse their rights, but in the end, they are not around long enoughto cause any substantial damage. One should always look into any newtechnique with a healthy amount of skepticism. Hopefully, this book willkeep that skepticism under control and unnecessary.
Technical AnalysisWhen considering technical analysis, one should remember that things arequite often not always what they seem. Many facts that we learned are notactually true; and what seems to be the obvious, sometimes is not. Manypeople believe water runs out of a bathtub faster as it gets to the end. Somepeople may drink like a fish, but fish don't drink. George Washingtonneither cut down a cherry tree, nor threw a dollar across the Potomac.Dogs don't sweat through their tongues, Audi automobiles never mysteriously accelerated, and the Battle of Bunker Hill was not fought at BunkerHill.A good detective will tell you that some of the least reliable information comes from eye witnesses. When people observe an event, it seems
Chapter 1their background, education, and other influences, color their perception ofwhat occurred. A most important thing that detectives try to do at a crimescene, is to prevent the observers from talking to each other, because mostwill be influenced by what others say they saw.Another curious human failing becomes a factor when we observefacts. The human mind does not handle large numbers or macro ideas well.That thousands of people die each year from automobile accidents raisesscarcely an eyebrow, but one airplane crash killing only a few people,grabs the nation. We are only modestly concerned that tens of thousands ofpeople are infected with AIDS, but we are touched deeply when presentedwith an innocent child that has been indirectly infected. If a situation ispersonalized, we can focus on it. We can become deluded by our emotions, and these emotions can effect our perceptions. When our portfoliosare plunging, all of the fears that we can imagine are dragged out: recession, debt, war, budget, bank failures, etc. Something is needed to keep usfrom falling victim to everyday emotion and delusion; that something istechnical analysis.Almost all methods of technical analysis generate useful information,which if used for nothing more than uncovering and organizing facts aboutmarket behavior, will increase the investor's understanding of the markets.The investor is made painfully aware that technical competence does notensure competent trading. Speculators who lose money do so not onlybecause of bad analysis, but because of their inability to transform theiranalysis into sound practice. Bridging the vital gap between analysis andaction requires overcoming the threats of fear, greed and hope. It meanscontrolling impatience and the desire to stray away from a sound methodto something new during times of temporary adversity. It means having thediscipline to believe what you see and to follow the indications from soundmethods, even though they contradict what everyone else is saying or whatseems to be the correct course of action.
Japanese candlestick AnalysisAs a new and exciting dimension of technical analysis, Japanese candlestick charting and candle pattern analysis will help anyone who wishes to
introductionhave another tool at their disposal; a tool that will help sort and control theconstant disruptions and continued outside influences to sound stock andfutures market analysis.What does candlestick charting offer that typical Western high-low barcharts do not? As far as actual data displayed —nothing. However, whenit comes to visual appeal and the ability to see data relationships easier,candlesticks are exceptional. A quick insight to the recent trading psychology is there before you. After a minimal amount of practice and familiarization, candlesticks will become part of your analysis arsenal. You maynever return to standard bar charts.Japanese candlesticks offer a quick picture into the psychology ofshort-term trading, studying the effect, not the cause. This places candlesticks squarely into the category of technical analysis. One cannot ignorethe fact that prices are influenced by investor's psychologically drivenemotions of fear, greed, and hope. The overall psychology of the marketplace cannot be measured by statistics; some form of technical analysismust be used to analyze the changes in these psychological factors. Japanese candlesticks read the changes in the makeup of investor's interpretations of value. This is then reflected in price movement. More than just amethod of pattern recognition, candlesticks show the interaction betweenbuyers and sellers. Japanese candlestick charting provides insight into thefinancial markets that is not readily available with other charting methods.It works well with either stocks or commodities. Related analysis techniques, such as candlestick filtering and CandlePower charting, will add toyour analysis and timing capabilities.This book not only will serve as an introduction to Japanese candlestick charting and analysis, but will also provide conclusive evidence ofthe usefulness of candlestick patterns as an analysis tool. All methods ofanalysis and all assumptions will be open and unobstructed. You will, afterreading this book, either begin to use candlesticks to assist in your marketanalysis and timing or be confident enough in them to further your ownresearch into candlestick analysis.
Chapter 1
Japanese Candlesticks and YouOnce you become accustomed to using candlestick charts, you will find itdisconcerting to be limited to a standard bar chart. Without candlesticks,
you will feel that you are not seeing the complete picture — that somethingis missing. Besides providing the quick and easy pattern recognition, candlesticks have great visual appeal. The data relationships almost jump offthe page (or computer screen), hardly the case with bar charts.
introduction
For years, the only other price element used in bar charting was theclose price. The close was represented on the high-low bar as a small tickmark extending from the bar out to the right. Recently, bar charting has
incorporated the open price by another small tick on the left side of thehigh-low bar. This stands true for almost all stock charts and stock data
vendors. Most futures and commodity charts have always used the openprice because it was more readily available.
Candlestick Charts versus Bar ChartsThroughout this book, the assumed time period, will be a single day oftrading. It should be understood that a bar or candle line can represent anytrading period, not always just a day. However, daily analysis is probablythe most common and will thus represent the period of trading for thisbook. Additionally, the mention of investors, speculators, and traders willbe used throughout with no attempt to classify or define them.
Standard Bar ChartsThe data required to produce a standard bar chart consists of the open,high, low, and close prices for the time period under study. A bar chartconsists of vertical lines representing the high to low range in prices forthat day. The high price refers to the highest price that the issue tradedduring that day. Likewise, the low price refers to the lowest price tradedthat day.Figure 1-1
LAST: 99.3*3
Most bar charts are displayed with a volume histogram at the bottom.Charting services also offer a number of popular indicators along with thebar chart. Technical analysis software vendors gave the user a great deal offlexibility in displaying the bar charts. The standard bar chart could bedisplayed with indicators, volume, open interest, and a large assortment ofother technical tools appropriate for that software.
Chapter 1
Candlestick ChartsJapanese candlestick charts do not require anything new or different as faras data are concerned. Open, high, low, and close are all that is needed todo candlestick charting. Many data vendors do not have open prices onstocks. This problem can be addressed by using the previous day's closefor today's open price. This, however, presents a somewhat controversialsituation and is thoroughly discussed in Chapter 6.
Introduction
When drawing candlestick charts by hand, the Japanese use red insteadof white to represent the up days (close higher than open). With the use ofcomputers, this is not feasible because red would be printed as black onmost printers and you could not tell the up days from the down days. Thisalso applies to photocopying..
Figure 1-4E?
110030
"'
The Body (jittal)The box that makes up the difference between the open and close is calledthe real body of the candlestick. The height of the body is the rangebetween the day's open price and the day's close price. When this body isblack, it means that the closing price was lower than the opening price.When the closing price is higher than the opening, the body is white.
The Shadows (/cage)The candlestick line may have small thin lines above and/or below thebody. These lines are called shadows and represent the high and low pricesreached during the trading day. The upper shadow (uwakage) representsthe high price and the lower shadow (shitakage) represents the low price.Some Japanese traders refer to the upper shadow as the hair and the lowershadow as the tail. It is these shadows that give the appearance of a candleand its wick(s).
If you compare Figures 1-4 and 1-5, you can see that the Japanesecandlestick chart really does not display anything different from the standard bar chart. However, once you become accustomed to seeing Japanesecandlestick charts, you will prefer them because their clarity is superiorand allows a quick and accurate interpretation of the data. This matter ofinterpretation is also what this book is about. Japanese candlestick chartingand analysis will continue to grow and gain in popularity. For as. long as itis used as intended, only a profit of doom would suggest its demise.
A day of trading in any stock or futures market is represented in traditionalcharts by a single line or price bar; Japanese candlestick charting is nodifferent, except that the information is so much more easily interpreted.There is much information provided in a single candle line. This willhelp in understanding the psychology behind the many candle patternsdescribed in later chapters. There are a few candle patterns that consist ofonly a single candlestick and also qualify as reversal patterns. They will becovered thoroughly in the chapter on reversal patterns.Each type of candle line has a unique name and represents a possibletrading scenario for that day. Some candle lines have Japanese names andsome have English names. Whenever possible, if the name is in English,the Japanese name will also be given. The Japanese name will be writtenin a form called Romanji. This is a method of writing Japanese so that itcan be pronounced properly by non-Japanese-speaking people. Single candle lines are often referred to as yin and yang lines. The terms yin andyang are Chinese, but have been used by Western analysts to account forpolar terms, such as in/out, on/off, up/down, and over/under. (The Japanese equivalents are inn and yoh.) Yin relates to bearish and yang relates tobullish. There are nine basic yin and yang lines in candlestick analysis.These can be expanded to fifteen different candle lines for a clearer explanation of the various possibilities. It will be shown in later chapters how
Chapter 2most candle patterns can be reduced to single candle lines and maintain thesame bullish or bearish connotations.Reading the single daily lines is the beginning of Japanese candlestickanalysis. A few definitions should be given first. Remember, these termsand descriptions all refer to only a single day of trading. Depictions ofcandle lines and candle patterns will use a shaded day to show when bodycolor, black or white, is not important.
Candlestick Lines
Short days, shown in Figure 2-2, may also be based on the same methodology as long days, with comparable results. There are also numerous daysthat do not fall into any of these two categories.
MarubozuMarubozu means close-cropped or close-cut in Japanese. Other interpretations refer to it as Bald or Shaven Head. In either case, the meaningreflects the fact that there is no shadow extending from the body at eitherthe open or the close, or at both.
Reference to long days is prevalent in most literature dealing with Japanese candlesticks. Long describes the length of the candlestick body, thedifference between the open price and the close price, as shown in Figure2-1. A long day represents a large price movement for the day. In otherwords, the open price and close price were considerably different.How much must the open and close prices differ to qualify as a longday? Like most forms of analysis, context must be considered. Long compared to what? It is best to consider only the most recent price action todetermine what is long and what is not. Japanese candlestick analysis isbased solely upon the short term price movement so the determination oflong days should be also. Anywhere from the previous five to ten daysshould be more than adequate to produce the proper results. Other acceptable methods of determining long days may also be used. These will bethoroughly discussed in the chapter on pattern identification and recognition.
10
A Black Marubozu is a long black body with no shadows on either end(Figure 2-3). This is considered an extremely weak line. It often becomespart of a bearish continuation or bullish reversal candle pattern, especiallyif it occurs during a downtrend. This line, being black, shows the weaknessof the continuing downtrend. A long black line could be a final sell off;this is why it is often the first day of many bullish reversal patterns. It is;also called a Major Yin or Marubozu of Yin.
11
Candlestick Linesshadow, making it a strong bullish line. The Black Opening Marubozu(yoritsuki takane), with no upper shadow, is a weak and therefore bearishline. The Opening Marubozu is not as strong as the Closing Marubozu.
A White Marubozu is a long white body with no shadows on either end.This is an extremely strong line when considered on its own merits. Opposite of the Black Marubozu, it often is the first part of a bullish continuation or bearish reversal candle pattern. It is sometimes called a Major Yangor Marubozu of Yang.
A Closing Marubozu has no shadow extending from the close end of thebody, whether the body is white or black (Figure 2-5). If the body is white,there is no upper shadow because the close is at the top of the body.Likewise, if the body is black, there is no lower shadow because the closeis at the bottom of the body. The Black Closing Marubozu (yasunebike) isconsidered a weak line and the White Closing Marubozu is a strong line.
Opening MarubozuThe Opening Marubozu has no shadow extending from the open price endof the body (Figure 2-6). If the body is white, there would be no lower
Spinning Tops are candlestick lines that have small real bodies with upperand lower shadows that are of greater length than the body's length. Thisrepresents indecision between the bulls and the bears. The color of thebody of a spinning top, along with the actual size of the shadows is notimportant. The small body relative to the shadows is what makes thespinning top.
DojiWhen the body of a candle line is so small that the open and closing pricesare equal, they are called Doji (simultaneous or concurrent) lines. A Dojioccurs when the open and close for that day are the same, or certainly veryclose to being the same. The lengths of the shadows can vary. The perfectDoji day has the same opening and closing price, however, there is some
Chapter 2interpretation that must be considered. Requiring that the open and closebe exactly equal would put too much of a constraint on the data and therewould not be many Doji. If the difference between the open and closeprices is within a few ticks (minimum trading increments), it is more thansatisfactory.Determining a Doji day is similar to the method used for identificationof a long day; there are no rigid rules, only guidelines. Just like the longday, it depends upon previous prices. If the previous days were mostlyDoji, then the Doji day is not important. If the Doji occurs alone, it's asignal that there is indecision and must not be ignored. In almost all cases,a Doji by itself would not be significant enough to forecast a change in thetrend of prices, only a warning of impending trend change. A Doji proceeded by a long white day in an uptrend would be meaningful. Thisparticular combination of days is referred to as a bearish Doji Star (Chapter 3). An uptrend that, all of a sudden, ceases to continue, would be causefor concern. A Doji means that there is uncertainty and indecision.According to Nison, Doji tend to be better at indicating a change oftrend when they occur at tops instead of at bottoms. This is related to thefact that for an uptrend to continue, new buying must be present. A downtrend can continue unabated. It is interesting to note that Doji also means"goof or "bungle."
Long-Legged Doji (jujnFigure 2-8
The Long-Legged Doji has long upper and lower shadows in the middle ofthe day's trading range, clearly reflecting the indecision of buyers andsellers (Figure 2-8). Throughout the day, the market moved higher andthen sharply lower, or vice versa. It then closed at or very near the opening
Candlestick Linesprice. If the opening and closing are in the center of the day's range, theline is referred to as a Long-Legged Doji. Juji means "cross."
Gravestone Doji (tohba)The Gravestone Doji (hakaishi), shown in figure 2