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Step 1 -
Look for 3 WHITE SOLDIERS against Minor
Price Resistance, and/or a declining Major
Moving Average (10 MA, 20 MA, or 50 MA).
Ideally you want to find a series of 3
green candlesticks; however, 2 green
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 weak
near it's low price of the day. You
will reduce the risk of the 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 high, 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 BEARISH 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 above
the high of the previous day's
candlestick. Exit the stock
immediately if the stock breaks above this
price. If the stock gaps down,
proceed to Step 6. If the
stock gaps up, proceed to Step 8.
Step 5 -
Monitor the stock as it continues to
decline downward. Look for areas of
resistance (either minor price resistance
or base price resistance) on the 15 minute
chart, and re-adjust your protective stop
price to 1/8th above these levels of
resistance. This will protect your
profits, and/or minimize your losses if
the stock should turn against you.
Step 6 -
If the stock closes weak on the
previous day, there is a good chance that
the play will be spotted by other traders
(note that it has now formed a BEARISH
HARAMI on the daily chart), and result in
a morning price gap downward.
If the stock gaps down by over 5/8 point,
cover half of the position immediately
after the open to lock in your profit.
Place a protective stop 1/8th above the
high of the first 15 min. candlestick for
the remainder of your position.
Step 7 -
Monitor the stock as it continues to
decline downward. Look for areas of
resistance (either minor price resistance
or base resistance) on the 15 minute
chart, and re-adjust your protective stop
price to above these levels of resistance.
This will protect your profits, and/or
minimize your losses.
Step 8 -
It is also possible for the stock to
gap up on the following day due to overall
market strength. If the stock
gaps up and opens 5/8th higher than the
previous day's close, DO NOT PANIC AND
COVER RIGHT AWAY. In most cases,
the stock will sell off after a gap up,
and the high 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 above
the high of the first 5 minute
candlestick. Cover the stock
immediately if it breaks this protective
stop.
Step 9 -
Monitor the stock as it continues to
decline downward. Look for areas of
resistance (either minor price resistance
or base price resistance) on the 15 minute
chart, and re-adjust your protective stop
price to 1/8th above these levels of
resistance. This will protect
your profits, and/or minimize your losses.
Step 10
- Monitor the stock as it
declines downward, 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
strength. A bullish candlestick on
the 15 minute chart will serve as a good
indicator for a reversal point.
After the price reaches an area of support
and strength, cover half of your position.
This may occur on the same day as entry,
or on the following day, depending on the
weakness 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 decline. After the stock has
declined further, again look for an area
of support where the stock begins to
strengthen and reverse. This could
be a DOJI candlestick, or any other
reversal candlestick pattern on the 15
min. chart. Cover 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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