Japanese Candle Formations – Excellent Signs

If you haven’t already looked into japanese candle formations – you need to. I use my knowledge of this type af analysis literally every single day – day in day out on all time frames – everywhere and always.

Looking at the symbol $DXY this morning – one can clearly see a very tall “wick” on the daily chart – with a teeny tiny little body right at the very bottom. Known as an “inverted hammer” or possibly a ” shooting star” – this type of candle formation indicates that “price” (was at one point) at the top of the candles wick, but over the course of only one day ( and in this case even less time) selling pressure has taken price all the way down to the bottom of the formation. This is a very bearish formation – indicating that buying interest has all but dried up , and that the “bears” have more than likely  – taken over. Commonly, traders will wait for the formation of the “next day’s” candle for some form of confirmation but for those of us who are already in the trade (short the dollar) this type of candle serves as indication that “perhaps we where a touch early” but that good things are likely soon to follow.

I would consider –  that the dollar is finally, and I do say finally – as this has been a “grueling correction” to say the least….finally ready to roll over – paving the way for a myriad of trade opportunities including “long” NZD/USD, AUD/USD , EUR/USD, GBP/USD – as well “short” USD/CAD, USD/CHF.

I am currently in all pairs mentioned above as well as holding my “short” JPY’s against everything under the sun.

17 Responses

  1. Ronnie Byrd November 21, 2012 / 8:58 am

    That is great news Kong and I appreciate the info on the candle,did you notice the hammer candles on several if the indices { Daily Chart } yesterday also?

    • Pot Stock Watch November 21, 2012 / 9:14 am

      You’ve got it Ronnie…so for at least the next couple of days I’d like to assume we get some consistant “risk on” type action – but of course….in this market – be prepared for anything.

      • Ben November 21, 2012 / 9:34 am

        Should mean gold’s turn to come around as well?

        • Pot Stock Watch November 21, 2012 / 9:40 am

          Well Ben…….I have to say it…..gold and related stocks are a bunch of dogs these days! Unreal – how difficult it is to stay in this stuff (for myself as well). Extremely frustrating movement – and to boot…..the dollar “cycle” will likely ony see us get a couple days move lower….before….yup..u guessed it…..correction higher AGAIN.

          So……as I have plans to just hold these things through til gold makes its “pop” – I do think its gonna be a tougher haul, and a slower process than originally thought.

          What to do about it? – If a guy sees opportunity in coming days to sell..and look to buy in again at a later date – that works. Or…….as I plan (with such small postions) to just lettem go/hold through Dec and Jan.

  2. Ben November 21, 2012 / 9:43 am

    Got it, thanks. I can see that forex might fall into line with more precise timing on these things. Will keep my eyes open.

    • Pot Stock Watch November 21, 2012 / 10:11 am

      Ben…..pull a weekly chart on Gold and consider that the trend is clearly up / and then flat here over the past…gees…..even year and a half!

      That is a looooooong period of consolidation – and will be followed by the next leg up. Often these periods of consolidation can be seen as precursors in that…huge (I mean huge) positions are being built slowly – as not to move the price any great measure during this process.

      You can’t just go drop “x” millions n millions in a day without driving up the price so…….I know – it’s tough hanging in with gold – as the gains are longer term no question.

      Sideways is not a direction I like either.

    • rickybobby November 21, 2012 / 3:44 pm

      Forex_Kong – do you think we could see a few down days in the $DXY followed by a test of 82 to finish off the H&S pattern?

      • Pot Stock Watch November 23, 2012 / 12:00 pm

        Rickybobby!

        sorry but the comment didnt come through??….not sure why but – get back to me.

        ________________________________

  3. Ben November 21, 2012 / 10:37 am

    The insight is much appreciated. I’m a novice, but learning.

  4. kreks November 21, 2012 / 3:49 pm

    Strange underperformance by NZD and AUD today. Nevertheless, some beautiful inverse H&S patterns setting up on the 4H charts.

    • Pot Stock Watch November 21, 2012 / 3:54 pm

      NZD has been a complete and total dog for weeks now – as has AUD vs USD – although when we really consider that the dollar (as seen thru $dxy) is still hanging at the near term highs – I guess the move hasn’t even started!

      Its been great nailing the Yen weakness vs the commods….and Im assuming the dollar is next.

  5. DojiTrader November 22, 2012 / 3:27 am

    Hi Pot Stock Watch,

    What symbol is $DXY on Stockcharts?

    What is the difference between $DXY, and $USD on Stockcharts?

    Thanks!

    • Pot Stock Watch November 22, 2012 / 7:05 am

      They look virtually the same to me Doj…..I am assuming they are the same at stockcharts.com

      • schmederling November 22, 2012 / 10:42 am

        Time to take a load off and take things off the table – Run 72hrs…..
        USDJPY Long 1.62% closed
        EURUSD Long 0.52% closed
        EURJPY Long – 2.16% closed
        CADJPY Long – 1.33% closed
        EURCAD Long – 0.81% closed
        NZDCAD Short – 0.28% closed

        Time for a long weekend and some need R&R….. close down shop and plan for warmer weather…. heading to Florida 🙂 house hunting….

      • DojiTrader November 22, 2012 / 1:03 pm

        Hi Forex Kong,
        Stockcharts does not recognise the symbol $DXY.
        On what platform is $DXY used?
        So…. $DXY is the USD index? Same as $USD on Stockcharts?
        Thanks!

        • Pot Stock Watch November 22, 2012 / 1:50 pm

          I track $dxy thru Think or Swim….and from what I see…the symbol $usd at stockcharts is pretty much exactly the same chart.

  6. DojiTrader November 23, 2012 / 6:31 pm

    OK, thanks FK. I remember that Gary is always using the $dxy on some platform (his $dxy graphs do not look like Stockcharts) and the other day he saw a falling star on $dxy, while on Stockcharts the $USD looked more liek a spinning top… less clear it was a potential top). Anyway…..

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