SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT (MCOM S3) - LECTURE 18: CANDLESTICK CHARTS (MODULE 2)

This section deals with the third type of price chart ie, Japenese candlestick chart and its various types
The Japanese candlestick chart shows the highest price , the lowest price , the opening price and the closing prices of shares on a day to day basis.
The highest and the lowest price of a day are joined by a vertical bar. The opening and the closing price of the day which would fall between the highest and the lowest price would be represented by a rectangle so that the price bar chart looks like a candlestick
TYPES OF CANDLESTICK CHARTS
White and Black Candlestick Chart.
Doji Candlestick Chart.
Hammer and Hanging man
Shooting Star and Inverted Hammer
A White Candlestick is used to represent a situation where the closing price of the day is higher than the opening price.
A Black Candlestick is used when the closing price of the day is lower than the opening price
A Doji Candlestick is the one where the opening price and the closing price of the day are the same.
It is also known as neutral candlestick chart or indecisive.
Doji with a longer upper shadow and short lower shadow signals bearish trend, if it occurs in a bull market.
Doji with a short upper and long shadow signals bullish trend.
The candlestick with a long lower shadow, small body, and no or very little upper shadow is a hammer. Hammers at the bottom signals a bullish revival.
A similar Candlestick with a black body (red) is a hanging man.
The hanging man indicates a bearish reversal pattern that can occur at the top or resistance level.
The inverted hammer after a decline or downtrend indicates a potential trend reversal or support levels. After a decline the long upper shadow shows buying pressure during the trading session. A bullish gap or long white candlestick with heavy volume gives bullish confirmation.
The formation of shooting star after an advance indicates a bearish reversal pattern or resistance pattern. A downward gap or long black candlestick chart with heavy volume gives a confirmation of bearish trend
Gaps are those points or price levels where scrip has not changed hands.