CHARTS AND PATTERNS ANALYSIS: 05/09/12

Wednesday, May 9, 2012

FREE DOWNLOAD EOD CHART

FREE DOWNLOAD EOD CHART

http://www.chartnexus.com/software/cnx.php

FREE EOD CHART

NSE-BSE-DOWJONES - WORLD MARKET

WITH 25 POWERFUL TECHNICAL INDICATORS

HAMMER-HANGING MAN - INVERTED HAMMER PATTERNS

HAMMER (BULLISH)

Explanation

The Hammer candlestick formation is a significant bullish reversal candlestick pattern that mainly occurs at the bottom of downtrends. This pattern appears after or during a downtrend. It is a single candlestick pattern.

The market is characterized by a prevailing downtrend.

The small real body is at the upper end of the trading range.

The color of the small body is not important but a white candle has slightly more bullish implications than the black body.

It is easily identified by the presence of a small body with a shadow at least two times greater than the body.

There should be no upper shadow, or if there is, it should be very small.

The following day needs to confirm the Hammer signal with a strong

bullish day.

Hammer pattern is a bottom reversal pattern which is highly reliable for reversing a downtrend to an uptrend.

The overall direction of the market is bearish, characterized by a downtrend.

The market opens and then sells off sharply. However, the sell-off is abated and the market returns to, or near, its high for the day with a closing price at or near to its high for the day which causes the long lower shadow.

The longer the lower shadow, the higher the potential of a reversal

occurring.

The long lower shadow now has the bears questioning whether the decline is still intact. A higher open the next day would confirm that the bulls had taken control.

Long positions can be initiated if there is a large gap up or a higher close the next day of Hammer, which is considered as a confirmation of reversal of trend.

HANGING MAN (BEARISH)

Explanation

A Hanging Man occurs at the top of a trend or during an uptrend. The name Hanging Man comes from the fact that this candle line looks somewhat like a man hanging.

Hanging Man can be identified by an uptrend.

It is characterized by its small real body.

Real body is at the top end of the day’s range.

Colour of Hanging Man is not important. However, it is considered as more potent, if its colour is black.

Lower shadow of Hanging man should be twice as long as real body. There should be very little or no upper shadow.

The Hanging Man pattern is a sign of trend reversal. A Bearish Hanging Man Pattern signals that selling pressure is starting to increase.

Hanging Man indicates end of an uptrend.

In order for the Hanging Man to appear, the price action for the day must trade much lower than where it opened, then rally to close near the high. This is what causes the long lower shadow which shows how the market just might begin a sell-off.

A Hanging Man is formed during an uptrend on a day when the market sells off then rallies to take back most or all of the losses seen earlier in the session.

INVERTED HAMMER (BULLISH)

Explanation

The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and is a warning of a potential reversal upward. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy.

Market is in a downtrend.

Small real body

Real body is at the bottom end of the day’s range.

Very small, or no lower shadow.

The long upper shadow should be atleast twice the height of the real body.

The colour of the real body is nor important.

It is easily identified by the presence of a small body with a shadow at least two times greater than the body.

Found at the bottom of a downtrend, this shows evidence that the bulls started to step in, but that the selling was still going on.

The longer the upper shadow, the higher the potential of a reversal occurring.

Large volume on the Reverse Hammer day increases the chances for reverse.

A confirmation is required in a form of a bullish candlestick which open above the inverted hammer’s real body and a higher close act as an confirmation.

SHOOTING STAR (BEARISH)

Explanation

The market is in an uptrend.

A small real body is formed near the lower part of the price range.

Real body is at the bottom end of the day’s range.

Very small or no lower shadow.

The long upper shadow should be at least twice the height of the real body.

The colour of the real body is not important.

The Shooting Star candlestick formation is a significant bearish reversal candlestick pattern that mainly occurs at the top of the uptrends. opposite of the Hammer.

The Shooting Star simply tells us that the market opened near its low, then prices strongly rallied up and finally prices moved down to close near the opening price. In other words, the rally of the day was not sustained.

The long upper shadow represents that sellers had started stepping in at these levels. Even though the bulls may have been able to keep the price positive by the end of the day, the evidence of the selling was apparent.

It is easily identified by the presence of a small body with a shadow at least two times greater than the body.

The color of the body is not important although a black body should have slightly more bearish implications.

The longer the upper shadow, the higher the potential of a reversal

occurring.

Large volume on the Shooting Star day increases the chances to reverse.

A confirmation on the third day is required to be sure that the uptrend has reversed. The confirmation may be in the form of a black candlestick, a large gap down or a lower close on the next trading day.