STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

Interpretation of Heikin-Ashi

Heikin-Ashi Candlesticks are similar, but different than normal candlesticks. A Heikin-Ashi Candlestick is hollow (white) when the HA-Close is above the HA-Open. Conversely, a candlestick is filled (black) when the HA-Close is below the HA-Open. This is similar to normal candlesticks, which are filled (black) when the close is below the open and hollow (white) when the close is above the open.

While traditional candlestick patterns do not exist with Heikin-Ashi Candlesticks, chartists can derive valuable information from these charts. A long hollow Heikin-Ashi candlestick shows strong buying pressure over a two day period. Absence of a lower shadow also reflects strength. A long filled Heikin-Ashi candlestick shows strong selling pressure over a two day period. Absence of an upper shadow also reflects selling pressure. Small Heikin-Ashi candlesticks or those with long upper and lower shadows show indecision over the last two days. This often occurs when the two normal candlesticks are of opposite color.



The chart above shows QQQ with Heikin-Ashi Candlesticks over a four month period. The blue arrows show indecisive Heikin-Ashi Candlesticks that formed with two normal candlesticks of opposite color. Indecision can sometimes foreshadow a trend reversal. The red arrows show a strong decline marked by a series of Heikin-Ashi Candlesticks without upper shadows. This means the Heikin-Ashi Open marked the high and the remaining data points were lower. The green arrow shows a strong advance marked by a series of Heikin-Ashi Candlesticks without lower shadows. This means the Heikin-Ashi Open marked the low and the remaining data points were higher.