 |
|
 |
|
|
|
|
|
|
|
 |
| |
By LISA HALLIDAY
A
chartist undertakes an arduous quest to uncover
the deep, dark secrets of Japanese traders.
Beware of the hanging man, the dark cloud cover, the raindrop
and the shooting star. Seek out, oh wise investor, the doji
star that leads to the piercing pattern; observe the dumpling
top and the fry-pan bottom — keeping eyes particularly
peeled for long-legged dojis. When in doubt consult the writings
of master Munehisa
Homma — alias Sakata, a samurai of the old school, god of the market.
Welcome,
Occidental chart mavens, to the inner world of candlestick charting — a
form of technical analysis conjured up in eighteenth-century Japan and, until
recently, a deep, dark secret to gaijin. Now, thanks to Steve Nison, President,
Candlecharts.com,
the mysteries
of dark cloud covers
and harami patterns have been revealed to Western eyes.
Nison's quest for candlestick
wisdom has been arduous. He first stumbled across it when he noticed a Japanese
broker peering at odd-looking charts. Some of the Japanese he interrogated appeared
nervous and feigned ignorance; a library search revealed only sketchy information
in English. He persevered, initiating a lengthy fax correspondence with Japanese
adepts via the Nippon Technical Analysts Association, then finding a translator
(who also knew technical analysis) able to render nine classic Japanese texts
into English.
Why go to all that bother? "The exotic
terminology piqued my interest," Nison says. Moreover, he soon became convinced
that candlestick charts provide a lot more clues to the market future than do
plain-vanilla Western bar charts.
Hanging-man blues
Conventional technical
analysis searches out patterns that recur in simple bars that trace the fluctuations
of securities, from pork-belly futures to equities. The Japanese would color
that bar graph black (if the market falls) or white (if it rises), then
extend thin lines (called shadows) above or below (or both) to indicate highs
and lows — thus creating the appearance of a candle with a wick.
Nison
says
the technique allows patterns
to "pop
off"
the chart.
Nison
says the technique allows patterns to "pop
off" the chart. Indeed, certain shapes suggest certain market
emotions; the hanging man, for instance, with its small head and dangling shadow,
is (no surprise) a bearish sign.
Candlesticks tend to generate more complex patterns
than
bars do. The terminology reflects the method's origins in eighteenth-century
Tokugawa
Japan — the era of Homma, a rice-futures trader (the Japanese claim to
have invented futures) who is considered the father of technical analysis. Many
patterns have a definitely military cast: piercing, thrusting and engulfing;
belt holds and counterattacking lines. Others have mystical names: three crows,
three Buddha tops (in Japan three is a lucky number).
Although Japanese tend
to use candlestick charting prominently, until recently little about the technique
reached the outside world. Even Americans employed at Japanese firms had difficulty
get- ting an explanation. George Hersh, a vice president of equity
research at Daiwa Securities America, now regularly includes candlestick charts
in his reports, but before Nison got on the trail, all Hersh knew about them
was gleaned from a pamphlet in English he once read.
Nison has
become
a one-man
candlestick
proselytizer ...
Nison has become a one-man
candlestick proselytizer, teaching courses at the New York Institute of Finance,
chattering away about morning (bullish) and evening (bearish) stars on on the
Financial News Network, giving seminars. He was recently in London and Zurich,
spreading the word to Europe. And he's written a book on the subject: Japanese
Candlestick Charting Techniques (New York Institute of Finance/Simon & Schuster,
$65).
There's one nagging problem. The author of a recent article for a Japanese
commodity reporting service claimed that Americans could never master patterns
such as the morning star. His argument: The art of the candlestick is, like Kabuki,
calligraphy and the construction of tiny electronic gizmos, peculiarly Japanese.
Thus, the writer concluded, the sanctum sanctorum, illuminated by candlesticks,
will
forever elude the Western mind. Nison's response? "Read my book."
from Institutional Investor
| |
 |
|
|
|
|
