Reading candlesticks

A candlestick squeezes a whole day of trading into one shape. It shows four prices: where the day opened, its high, its low and where it closed.

The thick body spans the open and the close. The thin wicks reach up to the high and down to the low. On Be The Puck a hollow body means it closed above the open (an up day) and a filled body means it closed below (a down day). Many sites use green and red instead.

Reading a few common shapes. A long hollow body says buyers were in control all day. A doji, where open and close are nearly equal, says the day was a stalemate. A hammer, with a long lower wick, says sellers pushed it down but buyers pushed it back. A shooting star is the mirror image near a high.

A word of caution: a 2006 study of the 30 Dow stocks (Marshall, Young and Rose) found that popular candlestick patterns didn't make money on their own. Candles are a fast way to see what happened, not a signal by themselves. Context, such as where a candle sits in a trend, matters more.

Look for the biggest down day in the last three months, then for a doji. Notice how volume, the bars at the bottom, usually jumps on the big days.

Timeframes. The same idea works for any period: a weekly candle covers a week, a monthly candle a month. Be The Puck's daily plays read daily closes, weekly plays the Friday close and monthly plays the last close of the month. Next: how to read the trend these candles make, in trends, tops and bottoms.