Sunday, November 14, 2010 EST

The stock market had a great run to the upside since the Market Up signal on 9/2.

The MTR Indicator broke below the zero line. RSI has been trending down. Typically RSI break below 50 supports more downward movement.  RSI at a level of 50 can act as a support if the indicator turns back up.

The Heikin-Ashi Stock version chart of the model shown below to compare with the standard candlestick chart above.

Friday, November 12, 2010 EST
The Heikin-Ashi Technique, developed by Dan Valcu, for creating candlestick charts that help to identify trends.

The heikin-ashi method {heikin means "average" or "balance" in Japanese, while ashi means "foot" or "bar") is a visual technique that eliminates irregularities from a normal chart, offering a better picture of trends and consolidations. Just by looking at a candlestick chart created with this method, you get a snapshot of the market's direction and strength.

Compare the two charts below: PowerShares QQQQ Candlestick Chart vs. a Heikin-Ashi Chart.

The heikin-ashi candlestick technique uses modified open-high-low-close (OHLC) values and displays these as candlesticks. The modified values are computed using these definitions:

 haClose = (O+H+L+C)/4
 haOpen = (haOpen (previous bar) + haClose (previous bar))/2
 haHigh = Maximum(H, haOpen, haClose)
 haLow = Minimum(L, haOpen, haClose)

Scenario Trend Up Trend Down Trend
1 Trend is Normal Rising green bodies Falling red bodies
2 Trend gets Stronger Rising longer green bodies with no shadows Falling longer red bodies with no upper shadows
3 Trend gets Weaker Candle bodies get smaller. Emergence of lower shadows Candle bodies get smaller. Emergence of upper shadows
4 Consolidation Smaller bodies with both upper and lower shadows Smaller bodies with both upper and lower shadows
5 Change of Trend Very small body with long upper and lower shadows Very small body with long upper and lower shadows

If you have saved your chart settings to Candlestick or another format go to the Charts page and under Chart Settings select Heikin-Ashi as the Chart Type.