Criteria For Black Candlestick Theory.
Commentary: This is criteria I will be using. A Black Candlestick in my opinion is one of the best indicators in TA on and exaggerrated move.
Black candlestick basically is formed by closing up, but closing below the open price.
1) For examples to qualify.
A) RSI must be equal or greater then 70. (Criteria for Exaggerated Move)
B) Must form a black Candlesstick. (Definition above)
C) $25,000 Minimum Daily dollar Volume
2) Ground Rules
A) Entry Price: Stock Imaginary short price is closing price of day black candlestick is formed.
B) Trade Time Limit: 5 Trading Days.
C) How to measure success? We will measure success based on a stock going down 3% or more. We are taking the lowest close of the 5 days, assuming we don't get stoped out by the stock closing above 3% of the entry price. I decided to include large caps as well, but I will calculate the numbers with and without things that have over 1 billion in Market cap. Thing over 1 billion in market cap I will simply move the success/failure rate at 2% because they don't move as much as our microcaps do.
D) How to measure failure? If a stock closes 3% over the purchase price, the imaginary trade is stopped out and counted as a failure. If the stock closes above all 5 days the entry price it is counted as a failure.
E) A stock move 0-3% down from entry price, will count as a tie. 1/2 win and 1/2 loss. Obviously 0-2% on things over 1b market cap.
F) Good or bad news comes out, well those are the breaks. Either way, when you buy or sell a stock that is always a realistic risk to any trade you make. Once we get 100 or more examples 1 bad luck or good luck story ain't going to matter in the grand scheme of calculation here anyways.
I believe this best describes the info, and the parameters of this fact finding mission. I will continue to report basically monthly on how this project is going. If you have any suggestions of things that meet the criteria PM me please. The more examples the quicker will get results either way. All above is just my opinion, and I could always be wrong though.
