Your about to discover a new way to look at Japanese candlesticks. In fact in all my years of learning and applying Japanese candlestick techniques, I don't think I can say that I have ever seen an explanation like the one I'm about to give you. (Maybe there's a reason for that.)
We can just call it a new perspective. We'll start with a typical 3-4 days for a any stock. The following is the open, close, high and low for 3 consecutive days for DELL.
| Dell |
5/9/07 |
5/10/07 |
5/11/07 |
| Open |
25.88 |
25.95 |
25.47 |
| High |
26.15 |
25.97 |
25.85 |
| Low |
25.80 |
25.32 |
24.46 |
| Close |
26.04 |
25.44 |
25.65 |
First we'll look at 5/9. -- On 5/9 the stock opened at 25.88. The high for the day was 26.15, and the low was 25.80, and finally it closed at 26.04.
Lets look at the candlestick.
When were dealing with colored candlesticks they not only tell you the open relative to the close by virtue of a hallow candlestick and a solid candlestick, you also get insight into the close relative to the previous days close. (Or current price to previous days close.)
So lets look at one candlestick at a time. The highlighted candlestick is hallow therefore we immediately know that the close is greater than the open. Its also green letting us know that the close for today is greater than yesterdays close.
Remember: If a stock closes today at a higher price than it closed yesterday then we are making bullish progress. Additionally, if today's close is greater than the open we are making bullish progress.
Color (Green/Red) Compares - close to close
Hallow / Solid Compares - open to close
Looking again at the first candlestick, we will need to pull the previous day into the picture to truly asses today's candlestick.
Candlestick #1 -  Starting with the first candlestick, we can see that it opened at 26.17, dropped sharply to 25.57 and then at some point exceeded the open by .03 cents and then closed the day lower than the open.
Candlestick #2 - The next candlestick opened down a bit at $25.88, at some point it made a low of 25.80, then a nice high of 26.15. It closed at 26.04, higher than the open, and higher than the previous days close, this is why its hallow, and also why its green.
Hallow = Close > Open
Green = Close > Close 01 (close 1 days ago)
Japanese Candlesticks
Now lets compare candlestick #2 (5/10) from the paragraph above with our next candlestick.
On 5/10 we have a solid and red candlestick. Solid because the close is less than the open and red because the close is also less than the previous days close.
Now we will look at the last two candlesticks.
In explaining the concepts of candlestick charting its important to distinguish what the comparisons are. Just remember a candlestick is green or red based on the current candlesticks close. (close to close.) As soon as a candlesticks current price exceeds the previous days close it turns green.
If your candlestick is hallow that means that the close is greater than the open (close to open.) If the candlestick is currently hallow and the candlestick hasn't closed yet, it simply means that currently the price is greater than the open.(C>O)
A solid red candlestick means _____________________________?
A solid green candlestick means ___________________________?
A hallow red candlestick means ____________________________?
A hallow green candlestick means __________________________?
Answers at bottom
Solid red candlestick means today's close is less than the open, and today's close is less than yesterdays close.
Solid green candlestick means today's close is less than the open, and today's close is greater than yesterdays close.
Hallow red candlestick means today's close is greater than the open and today's close is less than yesterdays close.
Hallow green candlestick means today's close is greater than the open, and today's close is greater than yesterdays close.
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