Now that the seemingly inevitable has finally happened, it occurred to us to take a look back in an effort to see whether the Candlesticks had left any clues along the way. That quick little study has been very revealing.
But first: a little background.
Candlestick charts are "bar charts with ambition." The basic difference is that the range between the opening price and the closing price is "fattened-out" into a cylinder. If the close is higher than the open, the cylinder is left blank, or "white." If the close is lower than the open, the cylinder is filled in, "black."
This is Pattern Recognition 101. The use of the cylinder makes it very easy for the reader to see what the mood of the traders was, during that particular time period; and the recognition by the eye of the pattern and of its implications is instantaneous.
The Candlesticks are especially effective when price data are being delivered to the computer screen in real time. It is fascinating to watch the ups and downs of price movement; one can very nearly read the minds of the investors as they make net decisions, as a group, to buy and to sell.
The Monthly Candlestick GM bars of September, October, and November 2007, together, form a bearish "Evening Star" pattern, in which the Star is a fairly well-formed Shooting Star, which is also bearish. At that time, shares were selling in the $35 range.
On the Weekly chart, there was a Bearish Engulfing bar in October 2007 and four Bearish Engulfing bars during 2008.
On the Daily chart, there were two Bearish Engulfing bars in December 2007; a Bearish Engulfing bar in
February 2008; an Evening Star (in which the Star was a Doji Shooting Star) in July 2008; a Bearish Engulfing bar in September 2008; a Bearish Engulfing bar in October 2008; two more in December 2008; and another Bearish Engulfing bar in May 2009.
In retrospect, bearish Candlestick warnings were in more than adequate supply from late 2007 onward. Any investor who had even a rudimentary understanding of Candlestick charting would have known that the news was not good, and could have taken appropriate action. There were no secrets; it was all out in the open for everyone to see.
The author owns CandleWave, LLC, which publishes its Investment Newsletter twice per week and its Action Suggestions three times per week. The Action Suggestions review the major Indexes (and suggest precise safety stops); Gold; Silver; Crude Oil; five Forex pairs; the Dow 30 (individually); and includes the Commodities Daily Report. The CommoditiesJunction website sells the Commodities Daily Report (30-day trial for only $9.99). The Candelaabra website sells our "Candelaabra" trading system Operating Manual and a risk-free 30-day Joint Trial of Candelaabra and of Genesis Financial Technologies' "Trade Navigator" platform. Hop to it and get the Risk Free Trial now, right here at http://www.candelaabra.com/
By William Kurtz
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