Candlesticks and the Malaysian Stock Market by Gary S. Wagner, Bradley L. Matheny and F.Tam
Here's a look at how candlestick technique is applied to the Malaysian stock market, from the developers of Candlestick Forecaster and the director of PI Capital Research in Malaysia, who teaches Malaysian traders on Western technical analysis.
The dynamic moves of 1993 in Southeast Asian stock markets have gained the attention of traders globally. The Kuala Lumpur stock market in Malaysia, for example, has experienced a super bull market that began in August 1992. The pinnacle of that bull market saw the Kuala Lumpur Stock Exchange (KLSE) Composite Index (the index for 85 blue-chip equities) rise to a record high of 1,332 on January 5, 1994.
The Malaysian stock market has never attracted so many participants before. In just 11 months, between January and November 1993, the number of shares traded on the KLSE totaled 90.5 billion units, valued at about 197 billion RM (Malaysian ringgits), which converts to more than $78 billion US. This volume exceeded the total shares traded on the KLSE for the last 20 years put together! Not only that, for the 12 months from January to December 1993, the KLSE Composite advanced a phenomenal 642.49 points, or 101.5%. The dynamic move that propeled the market began around the end of August 1992. The first hint of the bull run that was about to begin was a black hammer formation that formed on the weekly candlestick chart.
The hammer and hangman candle formations are determined not only by their shape but also by their location within the current market trend. Moreover, each new additional candle can alter the types and interpretation of candlestick patterns that may form. When determining the candle's location, two candle classifications are used, the first based upon its location within a trend, and the second based upon its position in comparison to the prior candle.