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Nison Candlestick Summit – Day 2
The Candlestick Summit

Reaching the top levels of Nison
candlesticks- Day 2
Small real body inside an unusually

long white real body.
BASIC CRITERIA
• Two session pattern
• Market in uptrend, but trend not critical
• First candle unusually long white candle
• Second candle is much smaller than 1st
candle (about 25% or less).
• 2nd candle can be the same- or opposite
color- of first candle
• 2nd real body is within 1st candle’s real body
PATTERN PSYCHOLOGY
The indications based on the tall white
SUPPORT/MOMENTUM TRADING candle’s vitality is for the rally to continue,
But next session’s gap down and then failure
• Not used as resistance (unless 2nd to resume the advance to beyond the prior
candle is reversal signal (i.e. session shows those who had forecast
shooting star) strength are wrong! The rally could now be
• Not used for momentum trading running out of fuel.
www.candlecharts.com
www.candlecharts.com 1
 For FX, intraday and indexes can have

the same (or within 2 pips for FX) open
as prior close
 If the 2nd candle is a doji, the pattern is
called a harami cross
 The more the 2nd candle gets deeply
into the white candle the better the
signal.
 Because FX, etc, black can’t get deeply
into white candle, it is best to wait for
bear confirmation by a lower open or
close than black candle’s real body.
FX Pattern
 In general the less the 2nd candle gets
more into the white candle the more
confirmation is needed.
 Opposite of bullish harami
Bear Harami
Because these
are near the
highs of the
Not Bear prior candle
would want
Harami
bear candle
confirmation
Confirmation important in FX
Black candle that opens higher and then

closes more than halfway into prior
white real body.
BASIC CRITERIA
• Two session pattern
• Market in uptrend
• Open of black candle higher than prior close
• Black candle closes into white candle
STRICT CRITERIA
• Black candle closes more than 50% into white
real body
• Black candle opens above prior high
• Tall white and black candles
PATTERN PSYCHOLOGY
SUPPORT/MOMENTUM TRADING White candle and then gap higher keeps bulls
happy. But with black candle finishing well
• Highest high of both candles as
below white candle’s close the “upward
resistance
energy has cooled to the extreme” causing
• Consider buying on breakout over the bulls to become concerned and bears
high of pattern bolder.
 For FX, intraday and indexes can have

the same (or within 2 pips for FX) open
as prior close
 If the black candle doesn’t get more
than ½ way into white it is called an
“incomplete dark cloud cover” and it is
best to wait for bear confirmation.
 The more the open on black candle
gaps away from the prior high/close
the better the pattern (for non FX).
 Opposite of piercing pattern
FX Pattern
Is it a valid Nison Candlestick Signal?
Dark Cloud Cover defines Resistance
Dark Cloud Cover at resistance
Why is this
not a bullish
engulfing
pattern?
Dark cloud rains pain for the bulls
“Oh crap!”
Think there
is trouble
near $410?
Happy time for
the bulls- new
high close!
Dark Cloud Cover
Dark Cloud Cover and momentum
Dark Cloud Cover
Is this telling
you that there
is a shift in
psychology?
Not dark cloud cover
Chart courtesy of Genesis FT
BASIC CRITERIA
• Trend not important
• White candle followed by black candle that
opens within white real body and closes
under prior open.
BASIC CRITERIA
• White candle followed by black candle that
opens within white real body and closes
under prior open.
STRICT CRITERIA
• Both long real bodies
• 2nd candle closes under prior low
• Black real body closes at, or near, its lows
PATTERN PSYCHOLOGY
The white candle means the bulls are running
SUPPORT/MOMENTUM TRADING the show. And then the next session the
market gaps lower and is not only unable to
make it this lost ground, but closes under the
resistance
white candle. This shows the bullish energy
• Consider buying on breakout over has been sapped out of the market resulting
high of pattern in very scared bulls.
 Since the market has to gap lower this

pattern not applicable to FX.
 The more the market gaps down on the
open and the lower the close on the
black candle the more meaningful the
pattern
 Keep in mind risk/reward since this
pattern is completed after substantial
move has already occurred.
 Opposite of Bull Sash pattern
 If open of black candle is same (or
lower) as prior open, it is a Bearish
Separating Line.
Bear Sash
Bear Sash
Bear Sash
Bear Sash
Being a Market Chameleon
Bear Sash
Bull Sash
White candle followed by black candle

that opens at (or below) prior open. Then
closes under black candle open.
BASIC CRITERIA
• White candle followed by black candle that opens at
(or below) prior open. Then closes under white
candle’s open.
STRICT CRITERIA
• Both long real bodies (rare)
• Black real body closes at, or near, its lows
PATTERN PSYCHOLOGY
With the gap down on 2nd day the bulls sense
danger. And then to make matters worse for them,
the market can’t even make up for the ground lost
SUPPORT/MOMENTUM TRADING on the opening. The tide of the market momentum
has now turned down.
resistance
• Consider buying on move above
high of pattern
 Easy way to remember this pattern is

the opens are the about the same (or
the 2nd candle open gaps away from 1st
candle’s open.)
 Since the market has to gap lower this
pattern not applicable to FX.
 Major challenge with this pattern is
since it is completed after substantial
move, could mean poor risk/reward.
 Opposite of Bull Separating Pattern
 If open of black candle is within prior
white real body, it is a Bear Sash
Pattern.
Bear Separating line
Bear Separating Line
Bear Separating line
TWEEZERS TOP
Two candles that have the same lows.

First candle large white.
A blended candle is a way of “compressing” combinations

of candle lines into as if they made one candle
Source: KABUSHIKISOUBA NO
TECHNICAL BUNSEKI – G.Ikutaro
How do we make a Blended Candle?
close 2 =
open 1
1) Use open of the first session for open of blended candle

2) Use close of the last session of pattern for close of
blended candle.
3) Use highest high and lowest close of all sessions for
upper and lower shadows of blended candle.
think of Blended candle as a “Summary candle” of the pattern analyzed.

How does this help?
2- To compare variations of candle
1- To determine if a pattern
patterns to determine the strength of
is net bullish or bearish
the signal
How is this non classic dark

Classic dark cloud cloud cover different and what
cover does it mean to outlook?
A falling window is resistance
Most important
resistance level
Resistance
Zone
Importance of Windows
First candle long white, second candle small real body, and third
candle is black that gets deeply into first real body.
white or
black
FX
Candles in Context
Evening Star
How about
here?
Would you
buy here?
Morning Star
Abandoned Baby Top
Falling Three Methods
A series of small candles inside the

range of a long black candle. The last
candle is another long black.
Why about this falling

three gives you extra
bearish confidence?
Three consecutive black candles,

each with a lower close.
Three Black Crows
Nison Case Study
1. What are the reversal signals?

2. Where is potential support?
3. Any signals confirming support
area forecasted in #2?
A- Chart Challenge
1. What are the reversal signals?

2. Where is potential support?
3. Any signals confirming support
area forecasted in #2?
Nison Case Study
What 4 bear candle

signals can you find in
the box?
Candlestick Candlesticks +
Charting Western
Strategies Indicators
Candlesticks + Trade Management
East + West Confirmation
Where a candle
signal confirms a
Western technical
signal
Candles plus Bollinger Bands……
Crack and Snap with Volume
The arrow points to a “Snap and Crack”. What

does volume do to increase the likelihood of this
technique working?
Nison Case Study

At the arrow we see a doji.
1) What is the volume on this doji telling us about the supply/demand situation?
2) What 2 candlestick signals in August give us a clue that there was support at the doji?
3) Although the doji was holding a support area, what happened on the day of the doji that would keep the short
term trend down? Based on this, what would we need to see to give bullish confirmation of that support area?
Using NCS and candles to confirm resistance
Why wasn’t
this window
my 1st
support ?
With Nison Candle Confirmation – long put at resistance
mkt @22.50
Buy 20 put @.70
5 days later mkt @21, 20 put @ .26
Candles and the ADX:

The Perfect Fit
 Stands for Average Directional Indicator

 Shows how strongly a market is trending
 Does not show direction of trend
Strong ADX with

prices in up trend. Strong ADX with
prices in down trend.
2
 Some technical indicators, such as moving averages,

momentum trading, work better in strongly
trending markets.
 Some technical indicators, such as oscillators, work
better in non trending markets.
 Traders check ADX to see if the technical indicator
they use is in right trend environment
 Use only on daily charts –

except for FX
 Use only for entries
 Lagging indicator
 Slow to recognize a new trend
Steve-
Apple has recently gone from 120 to 150 and the ADX on a daily basis
has not moved up. This is surprising. Comments? - Pete
 Common mistake- looking

at ADX level.
 Slope is the key
 Slope=change in ADX from

yesterday to today.
(today’s ADX level-yesterday’s
ADX level)
 Greater the slope, stronger

the trend
-.31
ADX 22.04 Slope = 24.11-22.04 =+2.07

ADX at 20.96 ADX 24.11
ADX at 20.64.
What do we need to
determine the slope
on this day?
Slope = 20.64-20.96 = -.32
ADX:22.38
Slope = +2.08 ADX:27.56
14 Period
ADX:20.30
ADX:26.03
ADX slope
increasing What is the slope?
Strong uptrend?
.5 or more
ADX:18.26
-.31
Minimum: ADX:18.57
14 Period
ADX slope
+.25 or
less
Strict: 14
Period
ADX slope
decreasing
Chuck@smartstops.net
Candles and ADX - The Perfect Fit
Reversal candles
help pick top and
bottoms.
Increase % by not
going against
strong trends.
Minimum:
14 Period
ADX slope
+.25 or
less
Strict: 14
Period Do we have to measure the
ADX slope on this hammer?
ADX slope
decreasing
Minimum:
14 Period -.40 -.10
ADX slope
.25 or less
Strict: 14
Period
ADX slope
decreasing
ADX slopes
2.24, 2.53, 2.67
Bull shadows on descent. But
based on ADX which of these is
more likely a turn?
Why didn’t I
put ADX
numbers for
these?
ADX : 27.98
ADX : 30.38
What candle patterns are at

the dashed arrows?
ADX : 31.80
What is the ADX telling us?
+.95
ADX:18.26
-.31
Minimum: ADX:18.57
14 Period
ADX slope
+.25 or
less
Strict: 14
Period
ADX slope
decreasing
Slope +.97
FOR BEAR CANDLE

REVERSAL SIGNALS
• Step 1 – get candle

signal
• Step 2 – ADX shows ADX:42.85

uptrend easing or and 41.02
so slope is
no trend: -1.83
ADX slope
increases by
less than .25,
and better if
slope is
negative
FOR BULL CANDLE ADX:

REVERSAL SIGNALS 1-31.97
2-32.67
3-32.48
• Step 1 – get candle 4-32.45
5-32.53
signal
6-30.23
• Step 2 – ADX shows 6

downtrend easing or no 1
trend: 4
3
ADX slope increases
2
by less than .25, and 5
better if slope is
negative
What patterns were at 1

1 and 2?
What pattern was

completed on last candle?
On the last candle, based

on ADX what is your
2
action/why?
ADX
Yesterday: 27.18
Today: 28.79
What pattern was

completed today?
Based on ADX what is your

action/why? What else
would you consider?
ADX
Yesterday: 29.75
Today: 30.95
What pattern was

completed today?
Based on ADX what

is your action/why?
What else would you
consider?
ADX
Yesterday: 31.27
Today:30.94
1- Based on ADX  3- What would you do here

which candle +.80 based on ADX and prevailing
line would you  technical signals (candle and
sell? 1,2 or 3?
+.20 non candle)?
+.59

-.40
2- Based on ADX
would you buy this
piercing pattern?
What pattern did this complete?

(hint look at the opening of both sessions)
What else happened on this session that

would make you nervous from the long side?
Candlesticks do not give price targets
Pivot Highs and Lows

This high is higher than the
session before and after it
This low is lower than the

session before and after it
Resistance Levels
Support Levels
Breakouts- long call on retracement
Stalling at resistance.
Looking for pullback
to breakaway gap
Mkt @ 428
Target 448
Buy 430 call
Stop close under window
Candles and Price Targets
This doji takes on extra significance

because it confirms a resistance level
Box Range
Trading Box Ranges
New high- let’s buy
East and West- Measured Moves
Box Range
Head and Shoulders
Head Right
Left Shoulder Shoulder
Neckline
Sell
signal
Head and Shoulders Top
How Candles Put More $$$ in your Pocket
What was candle reversal

here at 150
Extra profit
Reversal with Western

Technique at 141
What signal did we

have here at support?
TASC Interview - Jan. 24, 2003 S&P at 860

Head and 1) Once the neckline’s
Shoulder top support is broken, it
should become
resistance.
2) To get a target with the

head and shoulders top
we measure from the top
of the head to the
neckline.
neckline Interview
“… the heads and shoulders top on the

S&P gives a target to near 775. A close
over 870 would void this.” Hammer
Trading on the open
Trading on the open
Candlestick Candlesticks +
Charting Western
Strategies Indicators
Candlesticks + Trade Management
The 10 rules of Disciplined Trading and Investing
1. Don’t forget “candles in context”
Candles in Context
“To know where

you stand is as
important as
candle pattern
recognition.”
Misinformation can cost you $$$
Candles in Context
Would you buy

on this
hammer?
Candles in Context
Not an ideal dark

cloud cover, but??
Trading with Discipline

2. If…then system
The If…Then Principle:

• If the market does not act as
forecasted then exit the position (Protective
Stops)
• Initiate a position when the market
justifies your potential trade (i.e. If the
market breaks above resistance, then buy.
• If the market does something different
than before then adjust trading strategy
If… then
Head and Shoulders Top?
If… then
Was Head and Shoulders Top Confirmed ?
I was thinking of buying GM for a longer

term investment and was willing to give up
a few $ to buy on momentum. Where do
you think my buy area was?
When would you pull the buy limit trade?
Momentum trade
Pulled buy stop

2. If…then system
3. Stops – always use them
Protecting
your Assets
Protective Stops keep you in the game!
Looks
promising at
the white
candles
How Education Saves you $$$$
Hammer
Nison Case Study

What
would you
do here
and why
You shorted
here
Protecting
your Assets
Protective Stops keep you in the game!
Looks
promising at
the white
candles
How Education Saves you $$$$
Hammer
Nison Case Study

What
would you
do here
and why
You shorted
here
Exit Strategies
 Protective Stops
 Time Stops
 Trailing Stops
© Steve Nison’s Candlecharts.com
If the market does not act as

expected within about five
sessions then consider
exiting
Don’t Stay Around
What are you doing hanging

around! You’re wasting
precious resources.
Hammer and Bull Engulf
Chart courtesy of Genesis FT
Trailing Stops
As the market moves

in your direction –
stop is adjusted to
help ride the trend.
“Golden” and “Dead” Crosses

Compares two moving averages
GOLDEN CROSS: shorter crosses above longer DEAD CROSS: shorter crosses under longer
Answer: 3 and 12 day
Trailing stops - letting the profits run
“I usually exit, it Shooting
corrects somewhat but

Star
then continues to go in Falling

window
the original direction

after that.”
You sold at shooting star or

falling window. A rally from a
bull harami gets you nervous
and you exit. But you’re still
playing with the market’s
money- so another option:
trailing stop….
Trailing stops - letting the profits run
Shooting
Star
Falling window
Where you got nervous
Letting Profits Run
Could take some

or all profits here
Shooting star
Or use dead cross

as your trailing
stop and would
thus exit here
Buy and set

protective stop
Trailing Stops to let profits run
Now at target-
Doji warns of
caution. But you
want to let profits
run.
Potential Target
Buy and set

protective stop
Trailing Stops to let profits run
doji

2. If…then system
4. Consider options
Nison Candlesticks for Portfolio Protection
How can I boost profits even when my core markets are falling?
By using Nison candlesticks for pinpoint timing entering and

exiting covered calls and protective puts
www.nisonoptionsacademy
Nison Candle strategies for portfolio protection
Buy put
for
move
to
31.50
Mkt @ 33.75 buy 32.5 put @ .80

In case of move to 31.50
Reached target but no reversal signals (worth 1.60)
So ride it down to 30.50 at bull engulf put @ 2.25.
Time decay
Time decay (or time "erosion") is the decrease, of an

option premium's time value due to the passage of time.
The rate of this decay increases as expiration approaches.
At expiration a call or put is worth only its intrinsic value, if
it has any.
“With long options timing is everything since time

is working against you.”
www.nisonoptionsacademy.com
Using Nison Candle Scanner software for Options:

Method 1- Set up an alert
From the bear side
1. NCS finds a bearish engulfing pattern

2. Set up an alert if market gets to this
resistance level
Buy 7 day 210 put @ 2.58, exit harami @ 7.28 – 182% return
Using Nison Candle Scanner software for Options:

Method 2- Finding markets at key support or resistance areas
NCS saved you from 8

days time value decay

2. If…then system
4. Consider options
5. Is any news expected?
Stay Away
from the
Trade

2. If…then system
4. Consider options
6. Prevailing trend
Prevailing Trend
20 day m.a over

50 day m.a and both
sloping up
1) Connect to data feed

2) Set up and save Western template chart with your favorite
indicators
3) Set up and save NCS market analyzer with row filter
NCS all off
NCS bull
NCS bear
4) Determine trend of overall market
5) Have both market analyzer and western template chart open side
by side
6) Based on trend of overall market using NCS on market analyzer to
scan for bull or bear signals.
7) Based on scan put that market into Western chart template
8) Analyze to determine if good trade or not

2. If…then system
4. Consider options
6. Prevailing trend
7. Let the market tell you what to do
Adapting
The low of the

bullish engulfing
pattern as
support. Once
hammer is formed
(at the arrow) we
then adjust our
support

2. If…then system
4. Consider options
6. Prevailing trend
8. Indicators – the more the better
The Multiplier Effect

Where a Nison candle signal confirms another indicator
Nison Case Study
Two hammers picked up with NCS software at small arrows and

boxes (Note: only “hammer” was turned on in NCS)
1) Why is the line at the big arrow at b not a hammer?
2) Even though the candle detailed above is not a hammer, what
bullish signs are there ala’ shadows and real bodies at a,b and c
d f telling us?
e
3) What warns us of trouble at about d,e and f?
4) Would you buy at either of the two valid hammers? Why or why
not?
a c

2. If…then system
4. Consider options
6. Prevailing trend
9. Never trade in the belief the market is wrong

2. If…then system
4. Consider options
6. Prevailing trend
9. Never trade in the belief the market is wrong
10. Examine risk-reward
Always Check Risk – Reward
1. What is your price risk?

2. What is your target?
Do you have
a good
risk-reward?
Risk/Reward
Which is a better sale? Part 1
Scenario 1 Scenario 2
Which is a better sale?- Part 2
Which is a better sale? Part 31
Which is a Better
trading signal?
Risk/Reward
Dark Cloud Cover
Bearish
Engulfing
Pattern
Nison Case Study
Tell me about this signal re: candle signal, western

signal (hint- look at recent lows).
Would you go long on this signal? Why or why not?
What would you do and why?
Nison candlesticks for option strategies
Bull engulf at support

- poor risk/reward
but can do this trade
with a special option
strategy
Trading with Discipline
Don’t forget “candles in context”

If…then system
Stops – always use them
Consider options
Is any news expected?
Prevailing trend
Let the market tell you what to do
Indicators – the more the better
Never trade in the belief the market is wrong
Examine risk-reward
Trading Journal
 Date, market, $ amount committed

 Why did you do the trade
 Entry Price
 Risk
 Initial Target
 Exit Price
 Analyze Trade
Print out (or cut and paste) chart and make notes
What did you do right/wrong
Goal: Keeping emotions

out of your trading
Trading Journal - Setting up the Trade
 Entry Price
 Risk
 Initial Target
 Why did you do the trade?
Trading Journal - Analyzing the Trade
 Entry Price
 Risk
 Initial Target
 Exit Price
 Analyze the trade
Trading Journal - Setting up the Trade
 Entry Price
 Risk
 Initial Target
Support from a few months ago
 Entry Price
 Risk
 Initial Target
 Exit Price?
 Entry Price
 Risk
 Initial Target
 Exit Price
Steve recommends:
What would you do and why? Part 1
What would you do? Part 2
Putting it all Together

Trading Checklist
 Use NCS to find and confirm a valid Nison candlestick signal

 Does candle confirm Western signal (i.e. ADX,
support/resistance, volume, or any of your favorites)
 Check longer term trend
 Is any news coming out?
 Determine risk/reward (remember many of the candle

signals can be used as a protective stop)
 Monitor trade (i.e. time or trailing stops, change in technical
picture, etc)

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Nison Candlestick Summit – Day 2

The Candlestick Summit

Small real body inside an unusually

 For FX, intraday and indexes can have

Black candle that opens higher and then

 For FX, intraday and indexes can have

Is it a valid Nison Candlestick Signal?

Dark Cloud Cover defines Resistance

Dark Cloud Cover at resistance

Dark cloud rains pain for the bulls

Dark Cloud Cover

Dark Cloud Cover and momentum

Dark Cloud Cover

Not dark cloud cover

Chart courtesy of Genesis FT

 Since the market has to gap lower this

Being a Market Chameleon

White candle followed by black candle

 Easy way to remember this pattern is

Bear Separating line

Bear Separating Line

Bear Separating line

Two candles that have the same lows.

A blended candle is a way of “compressing” combinations

How do we make a Blended Candle?

1) Use open of the first session for open of blended candle

think of Blended candle as a “Summary candle” of the pattern analyzed.

How is this non classic dark

A falling window is resistance

Abandoned Baby Top

Falling Three Methods

A series of small candles inside the

Falling Three Methods

Falling Three Methods

Why about this falling

Three consecutive black candles,

Three Black Crows

Nison Case Study

1. What are the reversal signals?

1. What are the reversal signals?

Nison Case Study

What 4 bear candle

Candlesticks + Trade Management

East + West Confirmation

Candles plus Bollinger Bands……

Crack and Snap with Volume

The arrow points to a “Snap and Crack”. What

Nison Case Study

Using NCS and candles to confirm resistance

With Nison Candle Confirmation – long put at resistance

5 days later mkt @21, 20 put @ .26

Candles and the ADX:

 Stands for Average Directional Indicator

Strong ADX with

 Some technical indicators, such as moving averages,

 Use only on daily charts –

 Common mistake- looking

 Slope is the key

 Slope=change in ADX from

 Greater the slope, stronger

ADX 22.04 Slope = 24.11-22.04 =+2.07

Slope = 20.64-20.96 = -.32

Slope = +2.08 ADX:27.56