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Step 1 -
Look for 3 BLACK CROWS resting on Minor Price
Support, and/or a rising Major Moving Average
(10 MA, 20 MA, or 50 MA). Ideally
you want to find a series of 3 red candlesticks;
however, 2 red candlesticks can also work well.
Step 2 -
Pull up a 15 min. chart of the stock.
Step 3 -
Monitor the stock's trading during the last
30 minutes before the close, and enter only if
the stock is closing strong near it's high price
of the day. You will reduce your risk by
entering only if the range of the day (high
price minus low play price) is narrow.
This way, when you set your protective stop at
the day's low, you will only take a small loss
if the stock should reverse.
Step 4 -
Observe the daily chart after the market has
closed. The stock has now formed a BULLISH
HARAMI on the daily chart, but you were able to
spot the setup on the previous day and enter
before the rest of the herd! On the
next day, observe where the stock opens.
If the stock opens relatively near to the
opening price (say within 5/8th), place the
initial protective stop 1/8th below the low of
the previous day's candlestick. Exit the
stock immediately if the stock breaks below this
price. If the stock gaps up, proceed to Step
6. If the stock gaps down, proceed to Step
8.
Step 5 -
Monitor the stock as it continues to rally
upward. Look for areas of support (either
minor price support or base price support) on
the 15 minute chart, and re-adjust your
protective stop price to 1/8th under these
levels of support. This will protect your
profits, and/or minimize your losses if the
stock should turn against you.
Step 6 -
If the stock closes strong on the previous
day, there is a good chance that the play will
be spotted by other traders (note how a BULLISH
HARAMI is formed on the daily chart), and result
in a morning price gap upward. If
the stock gaps up by over 5/8 point, sell half
of the position immediately after the open to
lock in your profit. Place a
protective stop 1/8th under the first 15 min.
candlestick for the remainder of your
position.
Step 7 -
Monitor the stock as it continues to rally
upward. Look for areas of support (either
minor price support or base support) on the 15
minute chart, and re-adjust your protective stop
price to under these levels of support.
This will protect your profits, and/or minimize
your losses.
Step 8 -
It is also possible for the stock to gap
down on the following day due to overall market
weakness. If the stock gaps down
and opens 5/8th lower than the previous day's
close, DO NOT PANIC AND SELL RIGHT AWAY.
In most cases, the stock will rally after a gap
down, and the low price of the day will occur in
the first 5 minutes of trading. Let
the stock trade for 5 minutes and place a
protective stop 1/8th below the low of the
first 5 minute candlestick. Sell the stock
immediately if it breaks this protective stop.
Step 9 -
Monitor the stock as it continues to rally
upward. Look for areas of support (either
minor price support or base price support) on
the 15 minute chart, and re-adjust your
protective stop price to 1/8th under these
levels of support. This will protect
your profits, and/or minimize your losses.
Step 10 -
Monitor the stock as it climbs upward, and
stay in as long as the protective stop is not
violated. After the stock has achieved 1
point profit or greater, look for signs of
weakness. A bearish candlestick on the 15
minute chart will serve as a good indicator for
a reversal point. After the price
reaches an area of resistance and weakens, sell
half of your position. This may occur on
the same day as entry, or on the following day,
depending on the strength of the stock.
Maintain the latest protective stop price for
the remaining half of your position.
Step 11 -
Allow the stock to continue it's rally.
After the stock has rallied further, again look
for an area of resistance where the stock begins
to weaken and reverse. This could be a
DOJI candlestick, or any other reversal
candlestick pattern on the 15 min. chart.
Sell the remainder of the position for profit.
If you have any questions
regarding this report or the CANDLESTICKSHOP.COM
website in general, please do not hesitate to
contact the author at info@candlestickshop.com
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