Candlestick Reversal Patterns Foretell Decline in the British Pound

The foremost attribute of Japanese Candlestick financial price presentation is its uncanny ability to predict Reversals of Trend

. They were especially prescient in spotting the imminent reversals in the stock indexes in early March 2009, June and July 2009, and the end of the Great Rally in April 2010.

Their great value in identifying reversals which are about to occur is certainly not limited to stock indexes. We can observe the Candlesticks in action, "as it is happening," right now in the British Pound (more properly the Great Britain Pound).

The Weekly chart of the Pound for the week ended August 13, 2010 shows the "Real Body" of a tall black candle completely subsuming, or engulfing, the Real Body of the white candle which preceded it. This is known as a "Bearish Engulfing" pattern, which history shows as enjoying an excellent track record of accuracy in foretelling a substantial decline in prices following the formation of the pattern.

In the case of the Pound, this signal has been confirmed by the emergence of a concomitant bearish pattern, the "Sendai Racer," an eight-bar affair which completed on August 11. The first price bar of the eight was a tall white candle, signifying a strong "Up" day. It was followed by six small Real Body "Stars" at, or just above, the top of the tall white candle. The final bar of the pattern was a tall black candlestick, signifying a strong "Down" day.

Since the emergence of this bearish pattern, prices have in fact declined. Based upon the performance of the "Sendai Racer" Candlestick Reversal Pattern elsewhere, it is reasonable to assume that the Pound will continue to decline in a significant manner.

Candlestick Reversal Patterns Foretell Decline in the British Pound

By: William Kurtz

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