Historical Candlestick Analysis And Comparison

REVEALING THE HISTORICAL ACCURACY OF THE VARIOUS CANDLESTICK PATTERNS WITH A VIEW TOWARDS A COMPARATIVE ANALYSIS

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THE CANDLESTICK ANALYSIS

Many years of work have gone into building the foundation for this type of analysis. As mentioned in other documents by this author, the baseline data upon which the subsequent data was derived contains twenty years of historical data. Ticker, Date, Open, High, Low, Close, and Volume were compiled, structured, and verified before subsequent tables were derived. A candlesticks table was then compiled using custom and third party financial functions. Subsequent queries have yielded the results which are presented in this document. The ultimate goal of this analysis is to find those candlestick patterns which have tended to be the most accurate with regard to future price movement. Another way of stating this is, “to what degree are the various patterns able to determine the future price movement of a stock”? I have the overall numbers here: (Average % change over time for Days 1 – 7 after the pattern was formed). Here we are dealing with a single technical indicator – namely, a candlestick pattern. The point of the OLAP application is not to provide the historical performance of one specific technical indicator, but to find complimentary technical indicators which, when paired with groups of stocks meeting their specific criteria, will yield finely tuned - actionable results. Having said that, one must have a starting point. To know which candlestick patterns to favor gives the investor yet another tool with which to tease out the stock markets’ tightly guarded secrets.

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Assumptions:  

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All stocks with an “Open” price of less than .10 the day the pattern formed were discarded. This removes a substantial number of penny stocks which have a tendency to fluctuate in such a way as to skew the data. When a pattern (typically a single day pattern such as a shooting star) repeats within the seven day time frame (seven trading days), this additional instance of the pattern is ignored. This is necessary because we are looking for the percent price change for Day 1 – Day 7. Taking into consideration another instance of a pattern in this seven day time frame would skew the results. This scenario is one which would typically apply only to those patterns which take one or two days to form. Rare, and/or multiday patterns such as “Mat Hold” would never occur in the same seven day time frame and would not be subject to this exclusion. Patterns which require 4-5 trading days to form will obviously have far fewer occurrences than single or two day patterns. This would apply to patterns such as “Mat Hold” or “Rising Three Method.” The scarcity of these occurrences should not at all rule out their statistical relevance. In fact, these patterns yield some of the most interesting results. The fact that they take longer to form gives them a greater level of statistical accuracy than shorter term patterns. Many patterns must either occur in and uptrend or downtrend in order to be a significant measure of the future price movement of the stock. For those patterns which require this condition, any time they occur in the opposite trend they are discarded from the calculation. I initially considered generating separate reports for specific Bull and Bear markets; however, there is no reason to believe that a specific candlestick pattern behaves differently depending on the overall market. Obviously, the bullish patterns will have higher % change numbers in a Bull market but we are not concerned about this. We are primarily concerned with how accurate the candlesticks are with respect to one another. At some point in the future I hope to be able to generate a daily EOD report in which ALL stocks meeting the criteria for particular candlestick patterns are enumerated. This document will undergo several revisions before all of the cells are populated. The actual “percent change” numbers below are not to be considered absolute. Despite taking measure to discard junk data, stocks will fluctuate wildly due to many external factors. Herein lies the benefit of having such a large amount of historical data from which to perform our analysis.

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CANDLESTICKS Abandoned Baby Bottom Abandoned Baby Top Advance Block Bearish Belt Hold Line Bullish Belt Hold Line Body Gap Down Bearish Counter Attack Line Bullish Counter Attack Line Dark Cloud Cover Bearish Engulfing Line Bullish Engulfing Line Evening Doji Star Evening Star Falling Three Method Gravestone Doji Breakaway Bear Breakaway Bull Deliberation Bull Deliberation Bear Dragonfly Doji

Hammer Hanging Man Black Harami Black Harami Cross White Harami Cross White Harami High Wave In Neck Inverted Hammer Long Legged Doji Mat Hold Pattern Morning Doji Star Morning Star Piercing Line Rising Three Method Outside Bar Pattern Ladder Bottom Meeting Lines Bear Meeting Lines Bull On Neck Three Line Strike Bear Three Line Strike Bull

Bearish Separating Line Bullish Separating Line Shooting Star Side by Side White Gapping down Side by Side White Gapping up Stalled Pattern Tasuki Downside Gap Tasuki Upside Gap Three Gaps Down Three Gaps Up Three White Soldiers Thrusting Line Upside Gap Two Crows Western Gap Down Western Gap Up Three Outside Down Three Outside Up Three Stars In The South Tri Star Bull Tri Star Bear Tweezers Bottom Tweezers Top

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STRONG BULLISH REVERSAL

MODERATE BULLISH REVERSAL

WEAK BULLISH REVERSAL

STRONG BEARISH REVERSAL

Abandoned Baby Bottom Morning Doji Star Three Outside Up Three White Soldiers Bullish Engulfing Line *Dragonfly Doji

Breakaway Bull Thrusting Line Ladder Bottom Morning Star Three Stars In The South Tri Star Bull Deliberation Bull Meeting Lines Bull

Tweezers Bottom Bullish Counter Attack Line Three Gaps Down

Abandoned Baby Top Dark Cloud Cover Evening Doji Star Evening Star *Shooting Star Three Outside Down Bearish Engulfing Line Upside Gap Two Crows *Gravestone Doji

MODERATE BEARISH REVERSAL

WEAK BEARISH REVERSAL

BULLISH CONTINUATION

BEARISH CONTINUATION

Advance Block Deliberation Bear Tri Star Bear Meeting Lines Bear Breakaway Bear

Tweezers Top Bearish Counter Attack Line Three Gaps Up

Rising Three Method Three Line Strike Bull Piercing Line Bullish Separating Line Side By Side White Gapping Up Tasuki Upside Gap Mat Hold

Falling Three Method Three Line Strike Bear Side By Side White Gapping Down Tasuki Downside Gap Bearish Separating Line In Neck On Neck

MISCELLANEOUS PATTERNS

SINGLE DATE PATTERNS (require confirmation)

Body Gap Down Stalled Pattern Western Gap Down Western Gap Up White Harami White Harami Cross Black Harami Black Harami Cross Outside Bar Pattern (exhaustion)

Long Legged Doji Bearish Belt Hold line Bullish Belt Hold Line Hanging Man Hammer High Wave Inverted Hammer *Dragonfly Doji *Shooting Star *Gravestone Doji

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RESULTS

%Chg7Days Later

%Chg6Days Later

%Chg5Days Later

%Chg4Days Later

%Chg3Days Later

%Chg2Days Later

No. of Matches

%Chg1Day Later

No. of days to Form

Downtrend or Uptrend Required?

Pattern

Type

AbandonedBabyBottom

strong bullish reversal

3

1,346

2.2

2.35

2.41

2.28

2.22

2.15

1.93

neither

AbandonedBabyTop

strong bearish reversal

3

1,412

-1.96

-1.84

-1.77

-1.86

-2.06

-2

-2.03

neither

AdvanceBlock

moderate bearish reversal

3

8,412

0.99

1.01

1.08

0.97

0.96

1.05

1.01

neither

BearishBeltHoldLine

single day

1

10,021

-4.06

-4.05

-4.02

-3.97

-3.93

-3.87

-3.78

uptrend

BearishCounterAttackLine

weak bearish reversal

2

8,581

-2.37

-2.33

-2.28

-2.2

-2.17

-2.1

-2

neither

BearishEngulfingLine

strong bearish reversal

2

8,273

-4.3

-4.53

-4.43

-4.35

-4.31

-4.22

-4.1

neither

BearishSeparatingLine

bearish continuation

2

7,133

-0.85

-2.93

-3.15

-3.29

-3.42

-3.51

8.56

downtrend

BlackHarami

miscellaneous

2

8,743

0.73

0.9

0.96

0.98

1.04

1.04

1.26

neither

BlackHaramiCross

miscellaneous

2

9,470

0.03

0.1

0.14

0.17

0.26

0.25

0.29

neither

BodyGapDown

miscellaneous

2

10,091

0.43

0.82

1.55

1.78

2.37

3.06

3.29

neither

BreakawayBear

moderate bearish reversal

5

TBD

BreakawayBull

moderate bullish reversal

5

TBD

BullishBeltHoldLine

single day

1

9,947

4.85

4.69

4.48

4.27

4.1

3.93

3.77

downtrend

BullishCounterAttackLine

weak bullish reversal

2

8,593

2.22

2.31

2.43

2.5

5.58

2.69

2.79

neither

BullishEngulfingLine

strong bullish reversal

2

8,385

5.18

5.28

5.27

5.32

5.38

5.35

5.37

neither

BullishSeparatingLine

bullish continuation

2

7,209

3.8

4.71

4.96

5.24

5.55

5.87

6.14

uptrend

DarkCloudCover

strong bearish reversal

2

8,113

-3.94

-3.7

-3.4

-3.19

-2.96

-2.79

-2.59

uptrend

DeliberationBear

moderate bearish reversal

3

6,205

-1.1

-0.72

-0.59

-0.46

-0.29

-0.12

0

neither

DeliberationBull

moderate bullish reversal

3

5,994

1.27

1.12

0.99

0.89

0.77

0.78

0.83

neither

DragonflyDoji

single day* (see above)

1

TBD

EveningDojiStar

strong bearish reversal

3

6,932

-2.68

-2.64

-2.61

-2.66

-2.68

-2.62

-2.59

neither

EveningStar

strong bearish reversal

3

5,684

-4.54

-4.5

-4.47

-4.53

-4.55

-4.46

-4.46

neither

FallingThreeMethod

bearish continuation

5

36

-6.09

-5.87

-6.87

-7.73

-7.52

-7.25

-7.8

downtrend

GravestoneDoji

single day* (see above)

1

TBD

Hammer

single day

1

9,540

-1.06

-1.61

-1.76

-1.88

-1.99

-2.09

-1.85

neither neither

downtrend

uptrend downtrend

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%Chg7Days Later

%Chg6Days Later

%Chg5Days Later

%Chg4Days Later

%Chg3Days Later

%Chg2Days Later

No. of Matches

%Chg1Day Later

No. of days to Form

Downtrend or Uptrend Required?

Pattern

Type

HangingMan

single day

1

9,434

1.46

1.75

1.57

1.79

2.03

2.8

3.08

uptrend

HighWave

single day

1

9,431

0.31

0.58

0.79

0.77

0.51

0.78

1.06

neither

In Neck

bearish continuation

2

6,426

0.89

0.77

0.63

0.51

0.49

0.43

0.39

downtrend

InvertedHammer

single day

1

9,356

1.49

1.76

1.23

1.07

2.14

0.79

0.7

downtrend

LadderBottom

moderate bullish reversal

5

868

5.33

5.06

4.74

5.47

5.51

5.07

5.57

neither

LongLeggedDoji

single day

1

9,499

0.3

0.79

1.21

1.2

1.6

1.92

2.75

neither

MatHoldPattern

bullish continuation

5

42

2.97

3.57

2.64

3.06

2.9

4.05

6.19

neither

MeetingLinesBear

moderate bearish reversal

2

8,893

-0.67

-0.56

-0.4

-0.26

-0.1

0.05

0.2

uptrend

MeetingLinesBull

moderate bullish reversal

2

8,951

0.82

0.72

0.61

0.49

0.44

0.37

0.32

downtrend

MorningDojiStar

strong bullish reversal

3

5,870

2.78

2.97

2.81

2.86

2.86

2.75

2.69

neither

MorningStar

moderate bullish reversal

3

4,599

4.71

4.75

4.6

4.7

4.86

4.76

4.65

neither

On Neck

bearish continuation

2

7,068

1.01

1.17

1.23

1.24

1.43

1.51

1.55

neither

OutsideBarFormation

exhaustion

2

9,991

0.62

0.68

1.16

1.14

1.48

1.93

2.89

neither

PiercingLine

bullish continuation

2

8,846

4.34

4.34

4.26

4.26

4.33

4.3

4.27

neither

RisingThreeMethod

bullish continuation

5

78

8.01

7.3

6.97

7.4

7.41

8.27

8.6

uptrend

ShootingStar

single day* (see above)

1

TBD

uptrend

SideBySideWhiteGappingDown

bearish continuation

2

TBD

downtrend

SideBySideWhiteGappingUp

bullish continuation

2

7,488

1.83

2.15

2.68

2.81

3

3.27

3.47

uptrend

StalledPattern

miscellaneous

2

8,276

1.18

1.42

1.62

1.78

1.91

2.06

2.21

uptrend

TasukiDownsideGap

bearish continuation

3

TBD

downtrend

TasukiUpsideGap

bullish continuation

3

TBD

uptrend

ThreeGapsDown

weak bullish reversal

3

TBD

downtrend

ThreeGapsUp

weak bearish reversal

3

TBD

uptrend

ThreeLineStrikeBear

bearish continuation

4

TBD

downtrend

ThreeLineStrikeBull

bullish continuation

4

TBD

ThreeWhiteSoldiers

strong bullish reversal

3

8,597

1.8

1.98

2.03

2.04

2.07

2.09

2.11

neither

ThreeOutsideDown

strong bearish reversal

3

4,801

-2.92

-2.59

-2.25

-2.04

-1.72

-1.34

-0.94

uptrend

ThreeOutsideUp

strong bullish reversal

3

5,153

3.53

3.43

3.23

3.01

2.78

2.65

2.49

downtrend

ThreeStarsInTheSouth

moderate bullish reversal

3

TBD

uptrend

downtrend

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%Chg7Days Later

%Chg6Days Later

%Chg5Days Later

%Chg4Days Later

%Chg3Days Later

%Chg2Days Later

No. of Matches

%Chg1Day Later

No. of days to Form

Downtrend or Uptrend Required?

Pattern

Type

ThrustingLine

moderate bullish reversal

2

9,383

TriStarBear

moderate bearish reversal

3

TBD

uptrend

TriStarBull

moderate bullish reversal

3

TBD

downtrend

TweezersBottom

weak bullish reversal

2

TBD

downtrend

TweezersTop

weak bearish reversal

2

TBD

UpsideGapTwoCrows

strong bearish reversal

3

4,453

-3.04

-2.85

-2.51

-2.34

-2.08

-1.85

-1.7

uptrend

WesternGapDown

miscellaneous

2

10,047

2.02

2

3.39

4.13

4.97

6.05

6.02

neither

WesternGapUp

miscellaneous

2

10,133

1.93

3.23

3.08

3.49

4.55

5.26

5.88

neither

WhiteHaramiCross

miscellaneous

2

9,387

-0.04

-0.06

-0.06

-0.03

0

0.01

0.02

neither

WhiteHarami

miscellaneous

2

8,765

-0.69

-0.17

-0.01

-0.05

-0.05

-0.03

0.04

neither

1.51

2.38

1.26

1.1

1.1

0.89

1.31

downtrend

uptrend

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