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Dan,
Excellent response. This is exactly the foundation of candlestick
charting, with strong emphasis on the relationship between the open
and the close and the interim price action during the day. By
observing the size of the candle(height) the color (filled if a lower
close, open if a higher close) and the length of the shadows
(whiskers, the daily high and low) you can easily identify
patterns of strength or weakness, solid price movements or
indecision. Volume is not a traditional part of a candlestick
chart. Once you learn to read them, it's hard to go back to
standard bars. Candles don't help in determining the duration
of a move, but they assist in determining the direction.
James in Huntsville
p.s. not trying to convert anyone, as it is an acquired taste...
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The theory I have heard is that the market action at the open reflects what
the amatuers are doing and the action at the close reflects what the
professionals are doing. The amatuers go home from their day jobs, analyze
their charts in the evening or over the weekend and place an order to buy or
sell at the open the next day. The professionals watch the market through the
day and open or close positions during the last hour of trading. I doubt that
the professionals are trying to draw in suckers. More likely, they are trying
to open trades that they believe will be profitable or are trying to limit
their risk by closing positions and sitting on cash until the market reopens
(i.e. "daytraders").
As I understand it, a strong close is bullish while a weak close is bearish.
The action at the close reflects the opinions of the smart money.
Dan
Pocatello, ID USA
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<< Can someone explain to me what is happening when the market opens low and
then closes high. Is it that the novices are selling and driving the price
down while the professionals are buying to attract more buyers? Its been
this way for the last two days. Thanks for any clarification. jerry...
>>
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