the hAnDbook of technIcAl AnAlysIsfigure 14.41 Integrating Candlesticks with Chart Patterns on the Daily Chart of
AeroVironment Inc.
Courtesy of Stockcharts.com■ (^) The stoploss is placed at the low of the second candlestick or pattern.
■ (^) A sellstop entry order may be placed at the low of the second candlestick only
if there is evidence that the downtrend is still in effect.
14.3 Integrating Candlestick Analysis
In this section, we shall be looking at the integration of Japanese candlesticks with
various technical studies. A cluster or convergence of bullish or bearish indications
found at support and resistance respectively would be ideal and would add to the
weight of evidence for a bullish or bearish reversal. Combining Japanese candle-
sticks with Western‐based technical indicators and oscillators is an extremely very
powerful way of forecasting potential reversals in the market. Below are some
examples illustrating the efficacy of such an approach.integrating Candlesticks with Chart patterns
In Figure 14.41 we see candlesticks reacting at various chart pattern boundaries.
Points X and Y represent potentially good entries. Notice also how the Hammer at
Point Y tests the intersecting trendlines, while the small real body remains within the
Bollinger Bands. Notice also the Marubozu candlestick driven by excessive volume.