STOCK GOODIES PLAYS OF THE WEEK

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Interpretation of Kagi Charts

The simplest way to interpret Kagi charts can be summed up by Steve Nison's expression Buy on yang, sell on yin. When the Kagi line goes from thin to thick, prices have just exceeded their previous important high – that's a bullish signal. The opposite is also true. When the Kagi line goes from thick to thin, prices have just fallen below their previous low, not a good sign for things to come.

Standard support/resistance, trend and chart pattern analysis techniques can also be used with Kagi charts. In fact it is often easier to locate strong support or resistance levels on Kagi charts because of their "clean" appearance.

Another interpretation technique mentioned by Steve Nison is to look for a sequence of nine (mostly consecutive) shoulders or waists. Traders look for strong counter-moves soon after the ninth shoulder or waist appears.