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in Price Forecasting
Get a handle on general overview charts, and you may
end up illuminating Japanese market mentality
any investors are familiar
with candle charts, the
Japanese twist on the standard bar chart that shows opening,
high, low and closing prices for each
period. By using a candle shape and
shading it when the closing price
is below the opening price, the Japanese added a visual enhancement
that has helped many a trader shine.
The fact is, Japanese traders have
been using charts for hundreds of
years, dating back to the early days
of rice trading. When you add that
tradition to the large amount of
money Japanese institutions control,
its obvious why candle charts might
shed some light on what Japanese
market players think. You can get
part of the way via Bloombergs
General Overview Chart (Ichimoku
Kinkohyo in transliterated Japanese,
also known as Ichimoku Sanjin).
For example, lets check out the
general overview chart for the Nikkei
225 index. To bring it up, type
NKY <Index> GOC <Go>, where, in
addition to a standard candle chart, tricky, figuring out what they tell us
youll see five additional lines that about future price movement is trickidentify trading opportunities. The ier still. Some general rules can
lines are delineated in the key, but help. For instance, the area between
the conversion line and
they require further exthe base line is called
planation. Briefly, the
when the
the resistance zone or
conversion line takes
the midpoint between
price candle cloud. Analysts consider
this the support/resisthe high and low prices
tance area. In other
for the previous nine
lies
words, if the price candays, the base line takes
dle is above the zone,
the midpoint between
above the
it sets a floor, which inthe highs and lows for
dicates strength and
the previous 26 days
baseline,
a good opportunity to
and the lagging span
buy. Conversely, if the
is simply todays closing
the market
candle is below, it may
price charted 26 days
be a signal to sell.
ago. The last two lines
trend
When a rising market
are the leading span 1,
picks up speed and beor the average of the
is bullish
comes overheated, the
base and conversion
base line is likely to replines charted 25 days
resent the support level
into the future, and the
leading span 2, or the average of that would stop the eventual price
the highs and lows for 52 days, plotted decline. When the conversion line
crosses the base line from below,
25 days into the future.
If you think unraveling the lines is it may indicate a good time to buy.
Similarly, when the conversion line
crosses the base line from above, its
a sell signal. (The conversion line
is normally above the base line in a
rising market.) The crossover also
provides a measurement for the
running market strength and the
potential for any further rise.
In general, when the price candle
lies above the base line, the market
trend is bullish. If the candle lies
below the base line, the market trend
is bearish.
Now lets look at the lagging span,
which is supposed to read the flow
of the market by comparing todays
close and the close from 26 days
agosomewhat like the Rate of
Change function, ROC. The span inFigure 1. Type JYS <Crncy> GOC D <Go>. Tab down, change the ending
dicates the markets strength by its
date to 06/13/95 and press <Go>. The first buy signal occurred when leading
position relative to the price of 26
span 1 crossed above leading span 2
days ago. When the lagging span is
CRNCY
Figure 2. Tab in, change the ending date to 07/13/95 and press <Go>. The
buy signal was confirmed when the lagging span rose above the price from
26 days earlier
CRNCY