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Candles, Music, Action!
By MICHAEL HALLS
Steve Nison has a thing about candles, hanging men, dojis, morning stars and engulfing patterns.
And why not? Every time Mr. Nison talks about his candles and their hangers-on, people not only listen, they seem unable to get enough of it.
At a recent gathering of Technical Analysts from Germany, Austria and Switzerland at the Hamburg Stock Exchange, Mr. Nison lit a candle to illuminate his explanation of Candlestick Charting Techniques, a "new" - in relative Western terms - market charting method that has long been known in the East, and he argues can revolutionize market analysis in the West.
Mr. Nison was the star of the show at the European Workshop for Technical Analysts, held here on June 5. The normally staid atmosphere at the exchange, usually deadly quiet on Saturdays, was lit by Mr. Nison's real and analytical candles. Add the sound track of "The Phantom of the Opera" for a bit of mystery and claims of a "hot" new way of analyzing markets, and the combination seemed, well, enlightening.
"After the speech by Steve Nison, it appears that candlestick fever has come to Germany," said Frank Schmielewski, Reuter Sales Executive (Hamburg) who organized the workshop for Reuters. "A huge number of clients were calling us to get more information about candlesticks."
Despite the props and the drama, Mr. Nison is no Phantom. A member of the Board of Directors of the Market Technicians Association in The United States, he was Vice President and Senior Technical Analyst at Merrill Lynch in New York prior to joining the Nikkhah Group.
Mr. Nison is the acknowledged Western authority on candlestick analysis. His work on the subject, including his highly acclaimed book, "Japanese Candlestick Charting Techniques" has revolutionized technical analysis. He has written extensively about the issue, publishing articles in the Wall Street Journal, the Los Angeles Times financial section, Institutional Investor, Eureka and the Japan Economic Journal. He also discusses candles regularly in appearances on financial television programs such as CNBC/FNN, which in 1991 prompted the most calls the network ever received after a program.
In recognition of the fact that to explain candles, he must cover some 100 years of development, Mr. Nison explains the technique with Zen-like deliberateness. He shows how the candles are charted and explains the different formations like hanging man, doji, morning star, engulfing pattern and others.
"Bar charts show only the trend of the market," Mr. Nison said in an interview. "Candles show the trend, but they also show the force behind the move. Candles show who is winning in the on-going battle between the bulls and the bears."
Candles have been used longer than bar charts in Japan. Mr. Nison's point is that the combination of the "old" Eastern technique with more recent Western techniques can give an even "lovelier light" without burning the candle at both ends."
A key point is that the combination of old Far East techniques with modern western indicators, like RSI, Momentum, and Oscillator can help analysts get really hot," Mr. Schmielewski said. "Mr. Nison convinced the analysts that it is useful to combine candles with Fibonacci retracement as well as with Elliot Waves and other cycle analyses."
Mr. Nison's techniques have received glowing endorsements from a number of key analysts. In a parallel presentation, Stephan V. Hase of Merrill Lynch Berlin, endorsed Mr. Nison's contention that candlesticks work best in combination with other technical indicators. (His major working toolbox is Reuter Technical Analysis application). Anton Salcher, Ludwig Gutmann and Thomas Kummer-Hardt of Bayerische Landesbank, Munich, one of the leading research teams in Germany, showed their methods of working with Technical Analysis as a research and marketing instrument. And Joerg Schreiweiss of Deutsche Bank, Frankfurt, explained the use of different trading models, such as, the combination of fundamental data with technical indicators like stochastics.
The presentations won rave reviews and demands for more workshops of this sort. Participants called the atmosphere "amazing. "They said the information was of "high quality," and in the words of one analyst, " the RTA (Reuter Technical Analysis) application is really a very powerful machine for Technical Analysis".
A couple of people said that it had been wonderful to see how powerfully candle- sticks were working. Mr. Schmielewski said." This workshop has been the first in Europe organized by Reuters. Its success will probably lead Reuters to organize many more in the next months."
AN INTERVIEW WITH STEVE NISON
How long have you worked with candlesticks?
I began my research and use of the candles about six years ago. There was a Japanese broker who worked down the hall from me. She was looking at her charts (which were in candles) and, forgetting I was in her room, said, "we have a window" to herself. I asked her what a window was and she explained it to me. This is how I first got involved with candles.
Where did you get information about working with candlesticks?
I faxed between members of the Nippon Technical Analysts Association and I have had 13 books about candles translated from Japanese to English.
What are the major differences between this old analysis from the Far East and modern Western techniques?
Bar charts show only the trend of the market. Candles show the trend but they also show the force behind the move. Candles show who is winning in the on-going battle between the bulls and the bears. Candle signals often give a reversal in a few sessions while more traditional bar chart signals can take much longer. Candle signals will often give you a jump on those who use just bar charts. In addition candle charts have been used longer than bar charts in Japan.
What are the main strategies for using candlesticks?
There are many ways to use candles. These are described in detail in my book. They can be used alone or combined with any Western technical tool.
How can one learn to work with candles?
The most detailed book about the use and history of candles is my book which was published a few years ago.
What's the time-frame for candlestick analysis?
The same time frames used by those who look at bar charts can be used in a candle charts.
Do you think it works for all instruments and what is the typical user-group of candlesticks?
Candles are flexible enough to be used in any market where there is open, high, low and close data. Since my book dealt mainly with the futures market, futures traders are the typical users in the United States. But candles are mainly used for stocks by the Japanese. Also, my new book will deal with candles, stocks and the world financial markets (such as the DAX, Bund, CAC etc.). Thus, we should expect candles to become more widely used in these markets.
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