Wednesday, December 31, 2008

Happy New Year!

along with the holiday distractions, I'm also in the middle of moving my family from Russia to the UK and I haven't had the opportunity to get down and update this blog. my apologies. however, I would like to thank every reader of colt on candles and wish you the very best for 2009.

let's just wrap up last week's calls: two good, two bad with the total rating a smidgeon into negative territory. here's how it breaks down:

the candles were bearish on the euro. however, it opened at 1.3914 and closed at 1.4057, that's 143 pips up on the week. This gives us a forecast rating of -1.02%

usd/chf: I thought the candles were dollar bulls on the swissy too. however, you may recall that I was more luke-warm about this signal than the euro one. in retrospect, I think that this was due to the ratio between the candle body length to the shadow length. in future I will only accept a long shadow signal if the shadow is longer than the body. anyhow, the reading/signal was duff and usd/chf fell some 360 pips, leaving us with a forecast rating of -3.37%

gbp/usd: sterling fell like the candles said it would. After opening the week at 1.4942, it closed at 1.4653, a drop of 289 pips. this leaves us with a rating of +1.97%

usd/jpy: as the candles suggested, the dollar opened the week at 89.14 and rose to 90.67, a 153-pip rise and a rating of +1.69%

all in all that gives us a forecast rating of -0.73 for the week, and makes our running total (12.63 - 0.73=) +11.90

since this week is almost over, I won't post any calls. I will be back, bright and breezy, for the first full week of 2009.

Happy New Year!

Monday, December 22, 2008

shadowing christmas

...the candles [or at least their shadows] have something to say about all four majors this week. however, anyone who is trading this week should take extra care to tighten their stops and be
rigorous with their risk management. this is what the candles are telling me for this week:

eur/usd (dec 15-19): the euro's rise and fall last week has been well-chronicled. that long upper shadow points to bearish pressure and its length suggests to me that the euro will more probably fall this week than rise.

forecast: as long as resistance holds at 1.4180, usd should prevail over eur.

support: 1.3500
resistance: 1.4180

usd/chf (dec 15-19): as is so oten the case the swissy is a mirror-image of eur. however, note that this move had more vigour.

forecast: that long lower shadow makes dollar strength against chf more likely than dollar weakness.

support: 1.0696
resistance: 1.1420

...if I were to make a choice between these two signals, I'd go for the eur call.

gbp/usd (dec 15-19): this week's doji shows that the ugly contest I wrote of last week ended with the dollar coming out less repulsive.

forecast: that long upper shadow signals more winter darkness for poor old sterling

support: 1.4470
resistance: 1.5250

usd/jpy (dec 15-19): although this lower shadow is the weakest of the four, the odds are that an upmove is on the cards.

forecast: if it's touch and go and the yen continues to strengthen, the BoJ might well help us out. we see some improvement for usd/jpy

support: 88.30
resistance: 92.50

Sunday, December 21, 2008

looking forward to christmas week...

...the candles are bullish on usd/jpy and usd/chf and bearish on eur/usd and gbp/usd - in fact dollar bulls across the board in this run up to christmas. however, the market will be thin and could prove skittish in the extreme, so be careful out there. I'll post tomorrow with full detais of the candle calls.

Saturday, December 20, 2008

candles deliver for the last full week of 2008

two calls last week, bullish on eur/usd and bearish on usd/chf.
eur hit the ground running with the fed's move towards zero fuelling the ascent. the euro retraced 50% of its fall from 1.60 and then tested the 62% retracement level (around 1.47) before falling back on Thursday after the ecb cut its deposit rate in an attempt to get the money moving again. The move was hardly a surprise and will not come into effect until January 21, but the euro started to fall as the story broke and continued south until the end of the week. Nevertheless, the euro's early surge saw a weekly gain of 560 pips as it closed at 1.3921. That's a forecast rating of +4.02%.
we got a bearish mirror-image from usd/chf with added swiss fizz as the franc tested the 74.4% retracement level from the recent upmove to close the week at 1.1032, giving us a 733-pip confirmation of the candle's signal. This scores a forecast rating of +6.64%.
The week's forecast total comes to +10.66%, which gives us a running total of +12.63%.

Next week's trading will be light which means it could be flat or it could be really rocky. tomorrow, we'll be looking at what the candles foresee for the run up to christmas.

Thursday, December 18, 2008

fed fireworks end the year with a bang

so the fed put up their hands and admitted their inability to fix rates, opting instead for a range of between 0.00% and 0.25%. they said that the economy was in a terrible state and would be for 'some time' to come. they promised seemingly unlimited injections of cash to fix the problem. [gulp] we can only wait to see what 2009 brings...
the best round up of the fed's actions on Tuesday was in this Financial Times article: Fed slashes rates to near zero . I'd recommend watching the John Authers video report in the article. It's a clear concise (albeit sobering) rundown with a rather endearing touch at the end.

Monday, December 15, 2008

candle calls for this week (calls on eur & chf)

...this week is the last full trading week of 2008 and should prove to be full of interest. the fed are ensconced behind closed doors as I write and will announce their interest rate tomorrow, 19:15 gmt. the consensus is for a further 50bps cut to 0.50%.
the other big story this week will no doubt be the US Treasury's move to save the US auto industry from collapse. it's all very vague at the moment and this week should see the answers to the main questions:
how much?
from where? (george w said that using the tarp funds was a 'possibility')
and for how long? (most likely until obama takes the helm) I was saying yesterday we've two calls:
eur/usd (dec 1-5 & dec 8-12): last week's long white confirmed the doji of the week before and could possibly mark the breakout of the narrowing range that eur/usd has been trading in for the last 6 0r so weeks.

forecast: the euro looks set to continue its recovery.
resistance: 1.3645

usd/chf (dec 8-12): the franc woke up and last week's impressive long black leads us to expect more downside action this week.

forecast: the candles remind us that december is often difficult for the dollar.


usd/jpy (dec 8-12) last week's long spinning top charts downside pressure as traders ran for cover. However, the dollar rally at the end of the week marked speculation that the BoJ would intervene to weaken the yen. Japan's finance minister left me no wiser on friday and that long lower shadow on the candle bodes caution.

forecast: the candles caution against pitting your account against the BoJ!

gbp/usd (dec 1-5 & dec 8-12): sterling tried to strengthen but couldn't break resistance at 1.50 and spent the week inside the previous week's range. Although the bias seems to be on the downside, the candles are holding their horses.

forecast: the candles are watching this ugly-contest with interest
support: 1.4660
resistance: 1.5150

Sunday, December 14, 2008

thanks Mike G + this week's calls

...your comment is much appreciated Mike. I am far from feeling discouraged and I share your belief in the value of candle analysis. The problem with the fundamentals is that there are so mony factors in play with intermarket influences in addition to the more obvious data releases. In the new year, I hope this blog will develop to make more precise calls (with orders) primarily based on the candles but bringing other technical features and the fundamentals into play.

this week we're looking at two calls, one bullish for eur/usd and the other bearish on usd/chf. full details to follow tomorrow.

the candles splutter as the franc freefalls

...not a great week for the candles, however the lion's share of the blame must be placed on my broad shoulders.
I mentioned last week that there was a lot of 'me' in the usd/chf forecast and the market rapped my knuckles as the dollar lost ground in the safe-haven stakes to the tune of 424 pips over the week. that's a forecast rating of -3.6%
gbp/usd fared a little better (if not much) as the dollar weakened acoss the board. sterling saw a 205 pip gain against the greenback (forecast rating: -1.37%). however, sterling's failure to break resistance at 1.50 in a week of particular dollar weakness must point to a weaker pound in the coming weeks.
usd/jpy moved in our direction with the dollar hitting 13-yaer lows against the yen on Friday. I expressed concern over possible Bank of Japan intervention which were not calmed when BoJ governor Masaaki Shirakawa said on Wednesday that he was watching the forex market carefully. By Friday the bank was playing down such speculation when Japanese finance minister, Shoichi Nakagawa said that the country wasn't considering intervention. usd/jpy fell 176 pips, that's +1.93%

This leaves our running total further diminished (but still in positive territory!) at +1.97%

Sunday, December 7, 2008

can i get there by candlelight? (calls on CHF, JPY & GBP a retired policeman said to me this week these are indeed interesting times and maybe the candles can add a little clarity. however, the candles are challenging me at the moment, they are making me question how much I am queering their pitch :- just how much my perceptions are affecting what I was hoping to be a dispasionate analysis. of course, any pretensions to objectivity must been seen as naive, even hard scientists like physicists accept that and it follows then that something like candlestick analysis must be as subjective as they come. with this in mind, I am ready to grasp the nettle.

let's start with the least controversial:
eur/usd (dec 1-5) a pretty eventful week in the eurozone as jean-claude trichet broke with tradition by cutting interest rates by more than the expected amount. however, eur/usd was unmoved and closed the week to form a small simple doji which offered no confirmation for last week's hanging man.

forecast: i'm still waiting (respect to Diana Ross) as this pair stays resolutely in an ever-tightening range. when it breaks it could well be a big one!
support: 1.2390, resistance: 1.3090

usd/jpy (nov24-28 & dec 1-5) the previous week's spinning top was confirmed bearish by last week's long black. in normal circumstances this would be a 'go for it'. however, just pause for thought and consider the length of the lower shadow, there was a great deal of support for this pair below 93. more worringly, the pair is entering the territory where the bank of japan could well start weakening the yen - so procede with caution.

forecast: i'm with the bears here, but if the BoJ steps in all bets are off (as is the negative forecast rating!).
support: 90.90, resistance: 97

usd/chf (nov 24-28 & dec 1-5) my favourite this week. the previous week's black hanging man was followed by the same fruit of a different colour. what to do? i'm going to blend the candles (following Greg Morris, Candlestick Charting Explained) which will give us the open of the black and the close of the white. in otherwords a dragonfly (a 'T' with a long tail) and confirmation of the uptrend. i'm also heartened by the fact that the white body engulfs the black another bullish pointer. there is a lot of 'me' in this forecast and i'd welcome any comments/criticism.

forecast: i'm still a dollar bull when it comes to the franc.
support: 1.21, resistance: 1.2470

gbp/usd (nov 24-28 & dec 1-5) weird one this. the previous week's bullish confirmation went all bearish on me and wiped out almost 50% of the candles +ve running total. what we're left with is what i was taught was called penetrating lines, a bearish signal. however a quick scan of the internet revealed no such pattern. still, i'm ready to rank my memory over the internet and be bearish on cable.

forecast: the candles are telling me sterling is going down. however, they may be telling you something else!
support: after 1.45, 1.4130 , resistance: 1.50

Saturday, December 6, 2008

excuses, excuses's been quite a week and I just didn't get a chance to add to the blog. I suppose that the web is littered with blog debris, projects that started full of hope only to crash and burn after a few posts. A few more dormant episodes like this week's could add CoC to that sorry list and only I can ensure it doesn't happen...

as I wrote last week the candles were only shining on one of the majors, gbp/usd:

gbp/usd (candles for 17-21 & 24-28 Nov) the weekly candle that closed on the 21st was an inverted hammer which is a weak bullish signal at the bottom of a move. The following week provided confirmation in the shape of a long white. the candles were saying sterling would rally but as we now know, they were wrong. cable fell 623 pips from Dec 1st-5th. That's a pretty significant -4.23%. Coo! this it leaves the Colt on Candles forecast rating at a somewhat diminished running total of +5.01%.

will the candles keep their heads above water? only next week can supply the answers. tomorrow we'll see what the candles foretell for the coming five days and a quick scan of the charts now shows that we have clear signals on two pairs: cable and dollar/yen. tomorrow's post will deliver the full lowdown.

Sunday, November 30, 2008

How did the candles do last week?

We had two calls last week, one on usd/jpy and the other on usd/chf. the candles were bullish on the dollar against the franc. For a while it looked like they were going to be very wrong but as the week progressed the dollar strengthened and the pair closed the week 79 pips down. Still, the candles did give a wrong call with a forecast rating of -0.65%.
Meanwhile the yen was stuck in a range. The candles had been bearish on the dollar aginst the yen. They were right but only to the tune of 32 pips, giving a forecast rating of +0.34%

This gives us the sum toatal for the week of -0.31% and an overall running total of +9.24.
The candles continue to keep their cards close to their chests and there's only one clear signal this week, on gbp/usd. I'll write that up and give my take on the candles for the other majors tomorrow.

Until then, have a good one.

Monday, November 24, 2008

forecast for week Nov 24-28 (calls on the yen and the swissy)

eur/usd 17-21 nov. the nut tightens and the tension mounts as the week forms another doji inside the range of the previous week. I'm still waiting for a clean breakout, now of either 1.30 on the upside or 1.24 on the downside.

forecast: the candles remind us of the virtues of patience

usd/jpy 17-21 nov. a beautiful black doji with lower highs and lows than last week's candle suggests a bearish sentiment is in order. it must be bourne in mind that the last bullish week (4 weeks ago) came on hints that the bank of japan was ready to weaken the yen if they saw fit. support: 92.50 resistance: 97.70

forecast: the japanese candles say that the yen should strengthen but the japanese central bank may disagree

gbp/usd 17-21 nov. This inverted hammer is a weak bullish signal and sterling's inability to close last week above 1.50 makes it weaker still. An inverted hammer always needs confirmation (higher volumes on up moves or divergence from stochastic) as well as a clean break out of 1.50. Cable will find support at 1.4550 and resistance after 1.50 at 1.5250.

forecast: will cable rise or will cable fall? we must wait, for only time will tell

usd/chf 17-21 nov. A long white as the SNB cut and usd powered through 1.20. Those long shadows do make one pause for thought, but this is a bullish candle. Support at 1.1880 and resistance at 1.25.

forecast: the candles echo the swiss national bank when they say buy the greenback.

Saturday, November 22, 2008

How did they do?

We didn't have much riding on last week's moves as the candles only made one call: bearish on cable (gbp/usd).
That one turned out none too well but it could've been worse. Sterling pushed hard against our resistance at 1.50 and got as far as 1.5250 on Wednesday. However, risk aversion came to our aid and cable closed the week below 1.50 at 1.4866. Therefore price moved 213 pips against us which gives us a forecast rating of -1.43%. The running total is now +9.55%

Quick round up on the rest:

eur/usd: Support held at 1.25 for the fifth week running with little price change over the week.
usd/jpy: very similar picture with the yen with support being tested and holding at 94.
usd/chf The Swiss National bank caught us on the hop with their shock rate cut pumping the swissie through 1.22 and a tasty 243-pip continuation of the current up trend.

Monday, November 17, 2008

forecast for week Nov 17 - 21

looks like a week when the candles are generally advising a wait-and-see approach with only sterling offering a decent opening...

eur/usd 10-14 nov. a black spinning top with a bullish shadow spelling a third week of uncertainty for this most technical of pairs. Support at 1.25 continues to hold and I'd be looking for a breakdown of that before getting bearish. As far as the bulls go, wait for a close above 1.31 (at the very least) before risking Pamplona.

forecast: the candles are home, home in a range so you'll need to make your money in the channel. The eventual breakout, whether up or down, should be well worth the wait, mind.

usd/jpy 10-14 nov. At the bottom of a move this would be a hammer BUT it is in the second candle of consolidation after the failed piercing lines of 3-4 weeks ago. A white body would have given a slightly more bullish tone but as it is we are still waiting for direction on the yen. Support at 94 and resistance at 100.

forecast: the candles say that all things come to those that wait.

gbp/usd 10-14 nov. This long black continues a vigorous down move and closed below 1.50 to suggest there's more sterling weakness to come. Resistance at 1.50 with support at 1.42

forecast: if 1.50 holds, there's more downside to be found in the british pound.

usd/chf 10-14 nov. This long-ish white is a non-descript candle with its upper shadow mitigating any bullish promise. This shadow is also testing significant resistance at 1.20 and we see support coming around 1.1750.

forecast: the candles say sit this one out

Saturday, November 15, 2008

How did the candles do last week?

3 sound calls gives us a weekly forecast rating of +8.85%. That's two good weeks in a row and a running total of +10.98% : better than keeping your money in the bank, no danger!

Here's how last week's forecast breaks down:
eur/usd:The candles held true. Price fell as low as 1.2387 before recovering to close at 1.2688, bringing a weekly fall of just 112 pips. This gives us a faorecast rating of +0.88%
usd/jpy: The candles signalled uncertainty and we sat on the fence. The dollar fell 204 pips against the yen and support at 95.50 held and the pair closed at 97.06. We missed out but its better to be outside of a good position looking in than inside a bad position looking out.
gbp/usd: the candles said sterling was going to slide and it certainly did. gbp/usd opened at 1.5770, falling as low as 1.4555 before recovering to 1.4797. That's a fall of 973 pips - serious fallage! Forecast rating: +6.57%
forecast: the candles say that sterling is set to slide.
usd/chf: the candles said that the dollar was going to rise against the franc and that is what happened to the tune of 167 pips from open to close. The dollar rose to 1.20 on Thursday before falling back to close at 1.1917. This gives a forecast rating to +1.40%.

Monday, November 10, 2008

forecast for week Nov 10 - 14

eur/usd: weekly candle 3-7 Nov. This candle pattern marks the second week of correction of a down trend and is a doji. It signifies uncertainty but its high is lower than the previous week and the correction up is less. This leads me to continue to be bearish on the euro and give last week's levels of resistance (1.3275) and support (1.25 then on to 1.23).

forecast: the candles are coy yet whisper sell the unit against the buck

usd/jpy: weekly candle 3-7 Nov. This candle pattern is on the top of a correction of a down trend and is called doji. It signifies uncertainty and we should hold our horses. I anticipate support at 95.50 and resistance at 102.50.

forecast: the candles advise you to make yourself comfortable on that fence.

gbp/usd: weekly candles 27-31 oct & 3-7 Nov. This two-candle pattern is on the current down move and is called engulfing. In this position it is a strong bearish signal. Initial target/support at the tweezers (identified last week) at 1.5280 with resistance at 1.61.

forecast: the candles say that sterling is set to slide.

usd/chf: weekly candles 27-31 oct & 3-7 Nov. This two-candle pattern is on the current up move and is called engulfing. In this position it is a strong bullish signal and if we get a daily close above initial resistance at 1.18, next target is 1.19. Initial support at 1.16 with strong support at 1.1470.

forecast: the candles say that the dollar will rock as the swiss franc rolls.

forecast rating system

The aim of this blog is to explore the effectiveness on candlestick analysis and I think I'm going to need a more objective forecast rating than my own judgement. This is what I'll do. In last weeks analysis I said the euro would weaken against the dollar. it didn't, it rose 27 pips that's 0.21% so I'll call that -0.21. USD/JPY will be -0.25, GBP/USD +2.59, USD/CHF was a wait-and-see so that's 0. Total +2.13

Saturday, November 8, 2008

How did the candles do last week?

usd/chf: the hanging man failed as a bearish signal with price rising 200 pips over the week. CHF opened lower and closed higher, engulfing the body of the hanging man. My support wasn't tested at all and resistance held until Friday. My forecast was wishy-washy to say the least. However, it must be said that the franc hasn't regained its former status as a safe haven currency.
forecast rating: 2.5/5

usd/jpy: piercing lines did not hold true to its bullish promise. Price was unable to break 100 and fell 150 pips over the week. Support at 95.70 went untested. It goes without saying that the dollar failed to 'reach for the stars'.
forecast rating: 1/5

eur/usd: the candles were more reliable than my forecast here. The spinning top is a sign of uncertainty and price had no real direction over the week and closed on Friday less than 30 pips higher than its open on Sunday night. Neither support nor resistance were tested.
forecast rating: 2.5/5

gbp/usd: the spinning top was neutral but price fell 400 pips over the week. My levels of support and resistance were untested but my forecast was sound.
forecast rating: 3/5

Friday, November 7, 2008

...and bump!

eur/gbp hit the giddy heights of 8185 this morning and then went into a serious decline, closing my trade around 11 am .81. Leaving me with a profit of 50 pips which, I suppose, is better than a slap on the head with a wet fish.

Thursday, November 6, 2008

...and upward

and then locked in a little profit by raising my stop to .81 before going to bed. night night.


...and raised my target to my original 8250 - the BoE cut has changed the fundamental balance of the pair so may be 8250 is not too optimistic after all. Anyhow with my stop at break even, I've nothing to lose ('cept my profit).

steady as she goes

...raised stop to break even at 8050...

ecb delivers but reality bites

ECB cut 50 bps as expected with hints of another cut next month. Order triggered but things have calmed down and my optimistic target of 8250 seems somewhat over optimistic. I've raised my stop to 7795 and lowered the target to 8150.

BoE in 150 bps slasher!

So I'm between announcements now and this is my play:

BUY EUR/GBP @ .8050, s/l @ .7950 and t/p @ .8250

a long shot, but maybe a goody.

Wednesday, November 5, 2008

central bank action in europe

Big day tomorrow with both the BoE and the ECB due to make interest rate announcements. Both banks are expected to cut by 50 bps. The ECB will probably not surprise anyone and I expect a 50bps cut. However, the BoE is not so cut and dried. A lot of commentators are calling a 75bps cut with some suggesting a full 1%. I'm planning on monitoring EUR/GBP and doing nothing if the BoE cuts 50 and looking for a quick in and out buy if it 75 bps+. I am going to check the situation an hour or so before the BoE move (12:00 GMT) and may modify my plan then. I'll keep this blog posted.

an historic day... but not on forex

Congratulations to the USA on their new President (elect) I'm not an American myself, but I couldn't help but be moved by Mr Obama's speech last night: poise and clarity - a true statesman. So what's the deal on Forex? I was thinking (fundamentally) that the markets would like an Obama win and as the Forex markets are currently tracking the Equities markets then this would mean that the Europeans would strengthen against the greenback and the yen would weaken (in opposition to my weekly candlestick analysis). Currently, there's doji on EUR, CHF and GBP and some dollar strength against the yen - but nothing really definite and nothing spectacular...

Monday, November 3, 2008

central bank down under

One other thing worth checking at 03:30 is the RBA’s (australian central bank) interest rate announcement. They are expected to cut by 50 bps from 6.00% to 5.50% and a cut of 25 bps could be a good buying opportunity for a quick in-and-out 50 pips. If they cut 75 bps to 5.25% (or even better 100bps to 5%), I’m planning on selling the Aussie with a target of 0.6650.

forecast for week Nov 3 - 7

weekly candle 27-31 Oct, usd/chf.

A long lower shadow and a small real body forms at the top of an up move, this is the hanging man, a weak bearish signal.

CHF has been trending up since March and this pattern signals that the bears may be taking the initiative. I'd be cautious here until we see a definite direction. Resistance at 1.1750 and support at 1.1380

My forecast: it's touch and go whether the franc will regain its safe-haven status.

weekly candles long black 20-24 Oct; long white 27-31 Oct, usd/jpy.

A long white closes more than half way up the previous longer black, this is piercing lines, a bullish reversal pattern.
This week price will first encounter support at 95.70 and if this breaks down, the next target is 92.00. However, the pattern is bullish and we see a break out of 100 giving us a target of 103.30.

My forecast: watch the dollar reach for the stars

weekly candle 27-31 Oct, eur/usd.

Long shadows, small body, this is a spinning top, a sign of uncertainty. The long upper shadow gives the pattern a bearish tone and the long term trend is bearish too. The lower shadow is testing support at 1.25 and if this level breaks down, my next target is 1.20. Resistance at 1.3275.

My forecast: euro will weaken against the buck

weekly candles, long black 20-24 Oct; short white 27-31 Oct , gbp/usd.
Short white body, long shadows of equal length, this is a spinning top with neither a bearish not a bullish tone. Lower shadow forms tweezers with previous week's candle: signalling strong support at 1.5280. We see resistance at 1.6670, just above the evening doji star formed two weeks ago.

My forecast: watch sterling stumble against the greenback


This is my first post on my first blog.

This blog is going to look at weekly candlesticks on the four main forex pairs (EUR, CHF, JPY and GBP) and discuss what can be learnt from them.

The blog will also comment on all things forex. It will link to sites, articles and writers of interest.

The blog may be of interest to forex traders and users of technical analysis.

The blog is open to comments, questions and suggestions.
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