Japanese Candlestick Analysis
figure 14.49 Integrating Candlesticks with Moving Averages on the Daily Chart of
Icahn Enterprises.
Courtesy of Stockcharts.comintegrating Candlesticks with moving averages
In Figure 14.49 we observe candlesticks reacting at the 20‐day moving average of
Icahn Enterprises.
We have seen how combining Japanese candlesticks helps to provide more ef-
fective and accurate forecasts of potential tops and bottoms in the market, includ-
ing potential breakouts and continuations.14.4 Filtered Candlesticks
heikin ashi Candlesticks
Heikin Ashi candlesticks are a form of filtered candlesticks. Each OHLC price is
determined from a combination the current OHLC data and the previous period’s
OHLC data. When observed on the chart, it assumes a smoother appearance.
Rising and declining Heikin Ashi candlesticks have different colors, making trend
identification very easy. One popular way of using Heikin Ashi candlesticks is to
observe the tops of falling candlesticks and bottoms of rising candlesticks. When
there is a strong trend present:■ (^) Rising Heikin Ashi candlesticks exhibit little or no lower shadows. The ap-
pearance of lower shadows is an indication of a potential trend slowdown or
reversal.
■ (^) Declining Heikin Ashi candlesticks exhibit little or no upper shadows. The
appearance of upper shadows is an indication of a potential trend slowdown
or reversal.
See Figure 14.50.