CANDLESTICKSHOP.COM
It must be entertaining to technical analysts who have used candlestick charts for years to learn of the almost mystical regard that some technicians have for them. Part of this is probably the packaging. For all the colorful descriptions of technical price action -- from dead-cat bounces to breakouts -- you really have to take off your hat to some of the emotive phraseology embedded in Japanese candlesticks. From the hanging man pattern -- which sounds like the title of some early Clint Eastwood spaghetti western -- to bullish engulfing and piercing patterns, the vocabulary of candlestick charting alone is enough to make the average technical analyst feel as if his or her powers of perception (on the wings of mere metaphors, no less) have increased tenfold.
Admittedly, few of those who practice and preach candlesticks are notable for dispelling such dreams of analytic potency. Some less reputable (or, at least, less responsible) candlestick advocates seem to hint that candlestick signals are all you need to construct a sound trading strategy, system, or methodology. Still, putting aside the notion that, with good money management, systems built on random entries have done surprisingly well, it is hard to deny that candlesticks do make many aspects of trading or chart reading far easier compared to other methods of displaying price action. I have often repeated the quote by trader, educator, and Pristine.com founder Oliver Velez Jr., who insisted in a seminar that he wouldn't even consider looking at a chart unless it was in candlestick form.
MYSTERIES OF THE ORIENT
In addition to the number of books and articles about candlestick charting -- often underscoring the Japanese nature of these charts in an effort to gain cachet by way of the tried and true "mysteries of the Orient" strategy -- a number of websites have devoted part or all of their function to candlestick charting. Some of these websites work to teach candlestick charting to novice technicians or veterans who finally decided to take a peek beyond the bar chart, while other websites go for a more direct "tout" approach ("You want piercing patterns?! We got piercing patterns! You want dojis?! You want three white soldiers marching YOU to higher profits?!").
Fortunately, some websites do both, and one website in that category is CandlestickShop.com. Like many websites that have weathered the dotcom implosion, CandlestickStop.com is a free educational website, a subscribers-only trading service, and (to a lesser degree) an introduction to Sunset Capital Management, the entity behind CandlestickShop.com.
Visitors to CandlestickShop.com have access to a free newsletter and free online candlestick course. The newsletter includes announcements of new additions to the CandlestickShop.com website, educational reports on candlesticks, and additional "plays" from the Daily Candlesticks Plays list from the members-only area. Visitors also have access to "Play of the Day" and "Play of the Week" selections, as well as access to the CandlestickShop archives and a roster of recent profitable plays. The educational section, "An Introduction to Candlesticks," is as good as traders are likely to find elsewhere on the Internet, or better -- providing both a historical context for candlesticks as well as some primers on how candlesticks are most accurately interpreted and acted upon. CandlestickShop.com also features a good-sized candlestick glossary and an "Ask Stock Jock" feature through which traders can ask questions about candlesticks and technical trading.
If there's one thing I love in a website, it's a free trial. And CandlestickShop.com offers a 30-day free trial to new visitors interesting in learning about candlesticks and CandlestickShop.com. Those who become members have access to the daily and weekly candlestick plays, as well as "Play Instructions."
PLAY INSTRUCTIONS
The plays are presented in four columns. The first and third columns list 17 different bullish and bearish candlestick patterns, including advance, piercing line, doji star, engulfing pattern, rising three, hammer, harami, harami cross, inverted hammer, mat hold, morning star, morning doji star, thrusting line, star, three crows, tasuki gap, and long real body. Again, bearish versions of these patterns are listed in the third column. In the second and fourth columns are the stock symbols of the stocks that have charts with that particular candlestick pattern. By clicking on the stock symbol, CandlestickShop.com members are redirected to a price chart provided by StockCharts.com. Weekly candlestick plays are designed in much the same way, with the difference being the change in periodicity from daily to weekly.
In addition to its daily and weekly candlestick plays, CandlestickShop.com provides play instructions. While not stock-specific, the instructions are pattern-specific. If stock ABC is listed in the daily candlestick plays section as having a "mat hold (bullish)," then by going to "Play Instructions," the trader will be shown how to play a "mat hold (bullish)," not how to play stock ABC specifically. While some may prefer more exacting assistance that uses the recommended stock in the example, the level of detail in the more general instructions might be a bit of a surprise. For example, while trading signals (or setups) are generated on a daily basis, actual entries, protective stops, and exits (taking profits) are keyed off of 15-minute charts. It could be argued that this more generalized play instruction might be more helpful for traders in the long run, helping them focus on both the process of managing the trade as well as on the relationship between context (harami, morning star, and so on) and a trade management approach that takes that context fully into account.
And did I already mention that CandlestickShop.com offers a 30-day free trial? There is so much material still available on the Internet for fledgling traders and budding technical analysts interested in trying out tools and methods that may be new to them. Even those not actively trading can benefit from taking a look at how a service such as CandlestickShop.com develops trading signals, and how professional traders manage those trades once an entry has been triggered.
Whether to augment a trader's own technical work or to serve as the impetus for further study in the way candlesticks have made traders and technical analysts feel more capable and more aware of the markets, websites like CandlestickShop.com help make average traders good traders. And if you're already a good trader... who knows? If CandlestickShop.com has anything to say about it, you could be merely a candlestick leap away from becoming great.
--David Penn, Technical Writer
ALLPENNYSTOCKS.COM
You know you shouldn't. Deep down, you know better, don't you? But still, you just can't help yourself. Twenty cents a share for a company just about to make it into the big time. ... A buck fifty a share for this tiny, great little outfit that nobody knows about -- yet. And there you are, waiting to enter on the ground floor. You want to do it. You can't help yourself. But you also can't help but remember everything that everybody told you about penny stocks -- much of which is probably summed up in this note from Investor's Business Daily founder William O'Neil:
The Canadian and Denver markets list many stocks you can buy for only a few cents a share. The reason I suggest you avoid gambling in such cheap merchandise is that everything sells for about what it's worth. You get what you pay for.
Talk about getting no respect! If the late great Rodney Dangerfield had been a trader, he probably could have made a career out of the abuse heaped upon penny stocks alone.
But what if penny stocks were treated with a little respect? What if, granted that "respect" might be too much to ask, penny stocks were just treated seriously as speculative opportunities and/or uber-value investments? Certainly, many of those gold bugs who invest in gold mining companies have been known to dip into the single digits and even lower to sift value and opportunity from an otherwise muddy stream of low-priced stocks. And there are more than a few widely frequented, successful businesses -- such as the Denny's restaurant chain -- that nevertheless see their equity paper traded on the so-called "pink sheets." Is there no value to penny stocks whatsoever?!
Well, the folks at AllPennyStocks.com certainly believe there is more than a little value to be found in penny stocks. But when it comes to trading them, to steal a line from the recent Democratic Presidential campaign, there's a right way and a wrong way -- and too many penny stock traders have been going about it the wrong way.
So how does AllPennyStocks.com accomplish this "right way"? The site covers both the Canadian and American penny stock markets, and visitors can toggle back and forth between the Canadian and American versions. The website includes stock profiles on bulletin board stocks (70 such stocks at present), profiles that include information about the exchange where the stock is traded, market capitalization, 52-week high and low, most recent quote and news, a price chart (courtesy of Yahoo! Finance), a corporate overview and profile relating any subsidiaries, main revenue sources, management, business and investor contact information, and Sec filings.
The main page features a "Stocks to Watch" listing that posts stock names and symbols, exchange data and industry, and includes a link for more details. Capsule profiles of the most recently reviewed stocks are also on the main page of AllPennyStocks.com, as well as a market overview that gives closing data for the main stock averages and indexes in the US and Canada. On the left side of the main page is a navigator table that includes a variety of links to the rest of AllPennyStocks.com. Here in this navigator area are links to the most recently profiled stocks in the OTC:BB and Nasdaq markets, a most-actives link, technical analysis courtesy of Barcharts.com, historical quotes, and a stock symbol lookup.
Also in this navigator section are links to information and news about commodities in the form of a link to Barcharts.com's market overview page (recall that many penny stocks are involved in commodities and raw materials, as is the case with many gold and silver mining companies). Not only that, you'll be able to find a financial glossary, a stock calculator, and a "Beginner's Corner" that includes a review of what beginning investors and penny stock speculators need to know before investing in stocks. Other interesting sections include the AllPennyStocks.com message board, helpfully referred to in the navigator section as "Need a Pick," which features more than 600 reviews and stock picks from site members (membership/registration to AllPennyStocks.com is free, but not necessary to access many of the features on the website).
AllPennyStocks.com also features a portfolio tracker to help traders and investors keep up on penny/OTC:BB stocks of interest, as well as an archive of previous stocks to watch. This last feature is helpful not only for checking out the track record of those "must-watch stocks," but also for getting to know some of the penny stocks that have drawn attention in the past - and might draw attention from investors again in the future.
While the warnings against trading and investing in penny stocks are worth hearing out, it must be said in the interest of "fairness and balance" that more than a few traders have cut their teeth (and even made their first mini-fortunes) on penny stocks -- as traders, as brokers, or both. Money manager Gary Kaltbaum of Investor's Edge notes that he got his start in the investing world through penny stocks. Top trader (and Technical Analysis of STOCKS & COMMODITIES contributor) Teresa Lo has spoken of her early experience with the penny gold stocks of the Vancouver Stock Exchange in the early 1980s, most recently in a collection of essays about traders called The Guts And Glory Of Day Trading:
With penny gold stocks, when there's a new gold discovery the price will rise from 20 cents to $3 per share. That's a lot of money. But if you look at a chart and how it moves in terms of the trajectory, it's no different than what happened to Iomega or Qualcomm more recently.
For those interested in -- or just curious about -- the world of penny stocks, AllPennyStocks.com might be a must-browse website. The combination of a news-rich website and a fairly active message board helps traders separate true speculation and value-hunting from the sort of hype-driven (at best) gambling that plagues penny stock investing and trading. And those looking for stocks in certain areas where penny stocks have been known to do well -- such as in the commodities and raw materials sector -- will likely find in AllPennyStocks.com many of the tools they need to make sound investment and speculative decisions.
--David Penn, Technical WriterSuggested reading
Ingebretsen, Mark [2001]. The Guts And Glory Of Day Trading, Prima Publishing.
O'Neil, William J. [1988]. How To Make Money In Stocks, McGraw-Hill.
Originally published in the December 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2002, Technical Analysis, Inc.