The reliability of the three black crows candlestick pattern increases with the length of the candlesticks. You must watch however because extremely lengthy candlesticks have the potential to create over-sold conditions. Additionally, the reliability increases with an increase in trading volume, and also with the shortening of the lower shadow of the candles.

What does this pattern indicate is happening in the markets?
This signal indicates overbought conditions in which there has been more selling occurring in a particular stock than the bulls would prefer. This stock has been selling at its highest prices therefore increasing selling pressure. Each day the stock appears as if it wants to regain its former strength as it opens higher than the previous day’s close, however the sellers are able to regain control with the bears causing the stock to drop to a new closing low on the second and third days. Confirmation is important on the fourth day for this pattern to see whether the stock is overextended or if it continues to go much lower.

Japanese candlesticks patterns are very easy to recognize and are the perfect technical analysis tool for investors new to the stock market. It is important to learn about the major candlestick patterns such as the doji candlestick chart, the dark cloud cover, and the hanging man candle, before moving on to the secondary candlestick patterns such as the three black crows pattern. Additionally, many investors choose to combine Japanese candlesticks with other technical analysis indicators such as the moving average. Read about the different types of moving averages investors use as well as the moving average convergence divergence (MACD) indicator, and the moving average crossover.

Through combining these technical analysis tools you are on your way to successful investing.

The MACD is a technical analysis momentum indicator that shows the difference between fast and slow exponential moving averages. The most commonly used EMAs are the 26-EMA and 12-EMA. It was developed in an attempt to show the direction and strength of a trend, resulting in more clear buy and sell signals.

It compares the two EMAs, including the short-term average (12-day EMA) and the long-term average (26-day EMA). Additionally, there is a signal line (9-day EMA) that acts as a trigger that is plotted on top of the MACD and indicates opportunities to either buy or sell. (This signal is often referred to as the EMA MACD.) This signal line has positive and negative values and it is above and below the zero line, also known as an oscillator. The zero line (oscillator) represents the area of support and resistance for the indicator and the idea is to watch for movement above or below the zero line to determine positive (upward) or negative (downward) movement. Naturally, the moving average convergence divergence indicator shows positive momentum when it is above the zero line, and conversely it shows negative momentum when it is below the zero line. When the MACD is above zero signaling upward momentum, the short-term average is above the long-term average. The opposite is true when the MACD is below zero. Additionally, traders watch for the MACD to cross its signal line. When the MACD crosses up through the signal line it indicates to traders to buy, and conversely when the MACD crosses down through the signal it indicates to traders to sell.

The moving average convergence divergence is more useful in wide-swinging trading markets. There are three popular methods for using the MACD that we will discuss below. These include using crossovers, overbought/oversold conditions, and divergences.

Crossovers
Crossovers occur when the MACD moves above or below its signal line. When the MACD rises above its signal line, a bullish crossover occurs, and conversely when the MACD falls below the signal line, a bearish crossover occurs. This bullish signal indicates that the price of the stock, or other asset, is likely to have upward momentum. On the other hand, a bearish signal indicates that it may be time to sell.

Overbought/Oversold Conditions
At times the short-term moving average will pull away dramatically from the long-term moving average or in other words the MACD will rise. When this happens it signals that the security is overbought and it will soon return to more realistic levels.

Divergence
Divergence occurs when the security price diverges from the moving average convergence divergence indicator. When this happens it signals to the trader that the current trend is coming to an end. When the MACD indicator is making new highs and the prices fail to reach new highs (long entries) a bullish divergence occurs. On the other hand, when the MACD indicator is making new lows while the prices fail to reach new lows (short entries) a bearish divergence occurs. Both the bullish and bearish divergence are the most significant when they occur at the relatively overbought/oversold levels.

Continue to learn about the different types of moving averages as well as the moving average crossover. Learning about these other types of technical analysis indicators will help you to have a better understanding of the MACD. The moving average convergence divergence indicator can also be used in conjunction with other technical analysis tools such as Japanese Candlesticks. Read about the doji candlestick chart, the bullish harami candle, and the morning star. Once you have a clear understanding of the 12 major candlestick signals, you can then move onto the secondary candlestick patterns as well. Wise investors know that by combining technical analysis tools you will have an advantage over other traders who only use one method of analysis.

Exchange traded funds, or ETFs, are securities that track on an index, a commodity, or a basket of assets like an index fund, but that trades like stock on the major stock exchanges. The first and most widely known ETF is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol (SPY). All of the major stock indexes have ETFs based on them, including the Dow Jones Industrial Average, the Nasdaq composite, and the Standard and Poor’s 500 Index, the American Stock Exchange (AMEX) and the New York Stock Exchange (NYSE). In fact, most ETFs are currently traded on the American Stock Exchange. Currently there are about 700 ETFs, and they are quickly gaining in popularity.

ETFs typically offer low expenses, are easy to use, and provide the investor with the ability to diversify their portfolio. There are ETFs for gold, international stocks, bonds, large U.S. companies, small companies and real estate investment trusts. Basically if there is not already an ETF for the asset class you choose to invest in, there will most likely be one soon enough. Since ETFs trade like stocks and looks like a mutual fund, the difference in structure between ETFs and mutual funds explain part of the different investing characteristics. ETFs performance tracks an underlying index, which the ETF is designed to replicate and because they are designed to track an index they are considered to be passively managed, while most mutual funds are considered actively managed. From an investor’s perspective, an investment in an index mutual fund and an ETF that tracks the same index would be considered equivalent investments.

ETFs can trade instantly all day long and allow the investors to lock in a price for the underlying stocks immediately, unlike mutual funds that take orders during trading hours, but the transactions occur at the close of the market. When owning an ETF, investors can obtain diversification of an index fund and the ability to sell short, buy on margin, and purchase as little as one share. ETFs are basically index funds in their structure however investors must not be passive and take the buy and hold approach. For this reason investors interested in ETFs are encouraged to study everything about index investing.

Additional types of ETFs include sector ETFs, currency ETFs, style ETFs, and actively managed ETFs. These and other types of ETFs will be discussed in further detail in future postings under the exchange traded funds (ETFs) section of this site.

Please also read about the use of Japanese Candlesticks and other forms of technical analysis that are useful investing tools as well. You can learn about the major signals such as the doji candlestick chart, the bearish engulfing pattern, the inverted hammer candlestick as well as other secondary candlestick patterns. In addition to these patterns, you can also learn about technical indicators such as moving averages and the different types of moving averages that are available to investors.

When identifying candlestick patterns it is important for investors to note that a reversal does not always mean that the current trend (uptrend or downtrend) will reverse direction, but that the current direction may just be ending, or possibly going sideways. These patterns must be viewed within the context of the prior activity in order to be effective and they may have different meanings depending upon where they occur within the context of prior trends and formations.

After learning the 12 major candlestick patterns, such as the hanging man candle, the bullish engulfing pattern, and the evening star candlestick, investors can then move on to learning about the “secondary signals” such as the three black crows, the three white soldiers, and others. These secondary signals do not appear as frequently as the major signals but they provide additional opportunities needed when making important trading decisions.

In addition to using candlestick patterns, you should also use other forms of technical analysis in conjunction with candlestick analysis. Moving averages for instance are technical indicators used in technical analysis that you can learn about throughout this site. You can learn about the different types of moving averages as well as the moving average crossover. 

Continue your Japanese candlesticks education and learn about the secondary candlesticks signals below!

Three Black Crows
Three Identical Crows
Two Crows
Meeting Lines
Belt Hold
Three River Bottom
Three Inside Up
Three Inside Down
Three White Soldiers
Concealing Baby Swallow
Stick Sandwich
Homing Pigeon
Ladder Bottom

When moving averages move through each other, or crossover each other, it provides trading signals that technical analysts call “moving average crossovers.” The fast moving average is the average formed by the shorter period, whereas the slow moving average is the average formed by the longer period. As the changes in price occur over time, the “fast” moving average moves upward or downward, reflecting the price, and it does this quicker than the “slow” moving average.  As a result of these upward or downward movements, the moving averages crossover each other providing trading signals to the investor.

When the shorter-term moving average crosses “below” the longer-term moving average, this creates a “sell” signal (bearish signal). Conversely, when the shorter-term moving average crosses “above” the longer-term moving average, this creates a “buy” signal (bullish signal). Basically, a moving average crossover indicates a change in trend.

When looking at the speed of the systems when using the moving average crossover, the numbers of signals that are generated depend on the length of the moving averages. Typically, shorter moving average systems will be faster and will generate more signals for early entry into the markets. However, they also tend to generate more false signals than systems using longer moving averages. Due to this, and other reasons, it is very important that traders use this method in conjunction with other technical analysis tools and indicators.

Continue to review the weekly entries and read about the different types of moving averages and also read the entries that identify candlestick chart patterns used when conducting candlestick analysis. You can read about the morning star candlestick pattern, the hanging man candle, and the evening star candlestick and you can learn about what each of these patterns indicates is occurring in the markets. You can also check out our Stock Market Glossary that includes Stock Market Definitions and terminology.

Learn today how you can increase the probability of making profitable trades through combining moving averages with Japanese Candlesticks!

Please also continue your technical analysis education and read about the moving average convergence divergence (MACD) indicator.

General Stock Market Holiday Rules
Any holiday that falls on a Sunday and that is observed by the stock market or the stock exchange on that Sunday means that the market will be closed the following Monday.

Any holiday that falls on a Saturday, and that is observed by the stock market or the stock exchange on that Saturday, means that the market will be closed on that Friday before the holiday.

The day following Thanksgiving Day has a tradition of closing at 1:00 p.m. on that day, even though it is not considered an official holiday. *This holds true for other holidays as well.  Please note the early closing times for those days that precede and follow the holidays listed below.

It is also important for investors to understand that since we live in a global economy that other countries do not celebrate all of these stock market holidays. Fortunately for those living in the United States, the largest stock markets in the world are located here and they do follow the American holiday schedule.

Regular Stock Market Hours of Operation
The regular trading hours of the stock market are 9:30 a.m. to 4:00 p.m. Eastern Time. The after-hours sessions run from 4:00 p.m. to 6:00 p.m. Eastern Time for the NASDAQ and they run from 4:00 p.m. to 8:00 p.m. Eastern Time on the NYSE Euronext.

Please print out and post both the 2008 and the 2009 stock market holidays calendars below.

2009 Stock Market Holidays Calendar
New Years Day  ( January 1, 2009)
Martin Luther King, Jr. Day  (January 19, 2009)
Washington’s Brithday / President’s Day  (February 16, 2009)
Good Friday  (April 10, 2009)
Memorial Day  (May 25, 2009)
Independence Day  (July 3, 2009)
Labor Day ( September 7, 2009)
Thanksgiving Day **  (November 26, 2009)
Christmas Day **  (December 25, 2009)

**The NYSE Trading Floor closes early (1PM ET) on Friday, November 27, 2009 (the day after Thanksgiving); and Thursday, December 24, 2009.

2008 Stock Market Holidays Calendar
New Years Day  (January 1, 2008)
Martin Luther King, Jr. Day  ( January 21, 2008)
Washington’s Brithday / President’s Day   (February 18, 2008)
Good Friday  (March 26, 2008)
Memorial Day  (May 26, 2008)
Independence Day **  (July 4, 2008)
Labor Day  (September 1, 2008)
Thanksgiving Day **  ( November 27, 2008)
Christmas Day ** (December 25, 2008)

**The NYSE Trading Floor closes early (1PM ET) on Thursday, July 3, 2008; Friday, November 28, 2008 (the day after Thanksgiving); and Wednesday, December 24, 2008.

We hope that you found this information useful. For additional helpful information please check out our stock market glossary filled with stock market terminology as well as articles describing Japanese candlesticks and various chart patterns. You can also read more about technical analysis and indicators such as moving averages and the different types of moving averages.

When observing kicker signals of a bearish nature, you must look for specific criteria. First, you will notice that the price never retraces into the previous day’s trading range. Second, the price movement is in the opposite direction from the opening price and the first day’s open and the second day’s open are the same. Third, the trend is irrelevant for this signal. Lastly, the signal typically occurs as a result of surprising news, released before or after market hours, that affects investor sentiment. A bearish signal of this nature indicates very strong selling.

There are also instances in which bearish kicker signals are strengthened. First of all, you should look for longer candles, which make the reversal more dramatic. Second of all, you should look for the signal to gap down from the first day’s open as this further increases the probability of a reversal. What this means is that when the second day’s opening is at the exact same point as the first day’s opening instead of near its closing, this increases the probability of a reversal.

What do bearish kicker signals indicate is happening in the markets?
As previously discussed, this signal illustrates a dramatic change in investor sentiment due to surprising news that changes the direction of the price. A true kicker signal demonstrates such a drastic change in direction that the new direction will continue with significant strength for a good period of time. Investors must use caution if using this signal to go short or long, however because if the next day the prices gap back the opposite direction, then the investor must close out of the trade immediately. This does not happen very often, but if it should, investors must get out quickly.

Japanese Candlesticks are patterns that are easy to recognize and are the perfect technical analysis tool for new investors. There are additional signals such as the doji candlestick chart, the inverted hammer candlestick, the evening star candlestick, and the candlestick piercing pattern. Each signal is described and includes a brief description of what each signal indicates is happening in the markets. Additionally, you can find more definitions regarding the stock market by checking out the stock market glossary.

Once you are familiar with the 12 major candlesticks signals you can then continue your Japanese candlesticks education and learn how to identify the secondary candlestick patterns.

Simple Moving Average (SMA)
Also known as the arithmetic moving average the simple moving average is the most common method used to calculate the moving average of prices. It takes the sum of all past moving prices over a specific time period and divides the result by the number of prices used in the calculation. Many investors feel that this type of average has its limits considering each point in the data series has the same impact on the result in spite of where it occurs in the sequence. Additionally, investors criticize this average because they think that the most recent data is more important and should have a higher weighting. This is why there are different types of moving averages available to investors.

Exponential Moving Average (EMA)
Contrary to the simple moving average, this moving average puts more weight towards recent data and less weight towards past data and as a result is an indicator that is more often used. The exponential moving average is calculated by applying a percentage of today’s closing price to yesterday’s moving average value. When using this indicator it is important to keep in mind that it is more responsive to new information and it is for this reason that more investors choose to utilize this average among all the other different types of moving averages.

Weighted Moving Average (WMA)
This average is calculated by multiplying each of the previous day’s data by weight. Therefore it is designed to put more weight on recent data and less weight on past data. In other words, it is simply a moving average that is weighted so that more recent values are more heavily weighted than values further in the past. Evidence also indicates that the use of this type of moving average gives better volatility estimates than the simple moving average.

The first step to utilizing moving averages as your technical analysis indicator of choice is to understand the different types of moving averages that are available. Combining moving averages with Japanese Candlesticks is a great way to increase probability of profitable trades in the future. This site provides weekly entries that identify the different candlestick chart patterns utilized when practicing candlestick analysis. You can learn about how these patterns indicate what is happening in the markets. Patterns such as the dark cloud cover, the inverted hammer candlestick, the candlestick piercing pattern, and the bullish harami candle. By combining these methods, you are on your way to successful investing!

Continue your technical analysis education and read now about the moving average crossover.

When witnessing this signal, there are a set number of criteria to look for. First of all, it is important to note that the trend is irrelevant for this signal. Second, this signal typically occurs due to surprising news likely to affect investor sentiment. Third, the first day’s open and the second day’s open are the same, and the price movement is in opposite directions from the opening price. Lastly, the price never retraces into the previous day’s trading range.

What does the kicker signal indicate is happening in the markets?
This signal greatly indicates a dramatic change in investor sentiment as indicated by a sudden change in direction of the price. The new trend is likely to persist with great strength for a good period of time due to a surprising event that has taken place in the markets. Be cautious however when witnessing this pattern because if this signal is used to go long and then the following day prices gap back the opposite direction, you must close out the trade immediately. 

Additionally, when witnessing this candlestick pattern you should look out for a few things. First of all, the longer the candles, the more dramatic the reversal will be. Also, since the second day’s opening is at or near the same point as the first day’s opening, gapping up from the first day’s open further increases the probability of the reversal. Basically, if an investor sees a kicker signal, he or she should immediately go long or short depending on the whether the signal is bullish or bearish.

Japanese Candlestick patterns are the perfect technical analysis tool for new investors. They are easier to recognize and can be learned pretty quickly. In addition to the kicker signal, there are many more to learn about including the bullish engulfing pattern, the morning star, the hanging man candle, and the candlestick hammer signal.  Also, for more information on the stock market, you can check out the stock market glossary as well.

Please continue your Japanese candlesticks education and read about the bearish kicker signals.

Shooting Star - Candlestick Reversal Signal

To form the Shooting Star Candlestick Reversal Signal you will need the following price activity.   First, there is an established uptrend. The pattern forms when the open and close are near the same price and signifies obvious indecision between the Bulls and Bears. There is a long upper tail, or shadow equaling at least twice the length of the real body. (The upper tail shows the extent of the price movement during the trading period) There should be little, or no, lower shadow (or tail). While not required, this pattern has even greater importance when there is a gap between the real body of the previous trading period.

What does this signal indicate is happening in the markets?
This candlestick formation depicts the battle between the Bulls and Bears. The Bulls are in charge with an established uptrend. The Bulls continue to push prices higher on the market open, but the Bears step in and bring the price back down to near the initial starting point.  This serves as an early warning that while the Bulls may have kept the price movement positive, they are loosing their ability to maintain control.

It is important to note that the visual illustration depicted in this candlestick signal also appears on a downtrend, yet it tells a very different story. This  candlestick formation found in a downtrend is called an Inverted Hammer, and signals the end of a downtrend.

While the price values are identical to bar charts, the candlestick patterns are much easier to recognize. Japanese Candlesticks are the perfect technical analysis tool  for newly beginning investors. They are much easier to recognize and can be learned very quickly.

There are many additional signals important to learn about when studying Japanese Candlesticks. While the shooting star signal is, other signals such as the candlestick hammer signal,  the hanging man candle, the candlestick piercing pattern, and the dark cloud cover are just as  important to learn.

Please continue your Japanese Candlestick education and learn more about the bullish kicker signal.