When the 2014 trading year comes to a finish, a new candle stick will be available for your analysis: the yearly candle.
The yearly candle is a rare event and logically only occurs when an old trading year ends and a new one starts. The scale of the candle is often so large that many traders logically hardly even consider analyzing the yearly candle in the same as they do other smaller candles.
As I am writing this blog post, the new trading year has not yet started but I certainly will be analyzing the yearly candles:
- Where is the 2014 close compared to the high and low of the year?
- Are there are any sizeable wicks?
- How big is the candle?
Similar to analyzing daily, weekly and monthly candle sticks, traders can use the above information to make judgments and assess probabilities about next year’s trading in 2015. Let us take a look at a practical example with the EURUSD.
Open: 1.3330 Low: 1.2858 High: 1.4940 Close: 1.2957 Total candle: 2082 pips (high – low) Candle: bearish 373 pips (close – open) Bearish wick: 1610 pips (high – open OR close) Bullish wick: 99 pips (open OR close – low)
The trading year of 2011 was bearish for the EURUSD. Its close was very near the low: within 5% of the total candle (99/2082) and it had a very sizeable bearish wick on top of the candle (77% (1610/2082). Did 2012 indeed see a bearish continuation?
Yes it did. Although the first 4 months of 2012 were small sideways candles, the months of May and July were strong bearish and price eventually moved down all the way to 1.20 before finding a bounce again.
Open: 1.2928 Low: 1.2040 High: 1.3710 Close: 1.3212 Total candle: 1670 pips Candle: bullish 284 pips Bearish wick: 498 pips Bullish wick: 888 pips
The trading year 2014, despite the bearish pressure in May and July, actually ended on a bullish note. The EURUSD made a bull run from August to December 2012 and recovered its initial losses to close above the open. It also had a wick on the bottom that was more sizeable than the wick on the top. Was the bullish pressure a clue that 2013 would start out bullish?
Although February and March were sizeable bearish retracement months, ultimately yes, January 2013 and July-December were indeed bullish months.
Open: 1.3202 Low: 1.2746 High: 1.3893 Close: 1.3757 Total candle: 1147 pips Candle: bullish 555 pips Bearish wick: 136 pips Bullish wick: 456 pips
The 2013 trading ended up bullish but did 2014 see any bullishness? Not much. The first 4 months were slightly upwards but after that bearish pressure kicked in strongly. In this case the bullish 2013 candle had little impact on the next year: nothing ever works 100% of the time. Were there any signals that 2013 was a rising year for a fall?
Yes, there are 2 clues:
- Visually looking at the chart we see that 2012 and 2013 look like a rising wedge chart pattern;
- The size of the 2013 candle was small in comparison with the others: only 1147 pips.
Open: 1.3756 Low: 1.2120 (when this post was written; still waiting for 2014 close) High: 1.3993 Close: ….. (still waiting for 2014 close, but currently around 1.2120)
Nobody knows the value of the 2014 close but at the moment the price is at the low. Unless a substantial bullish bounce happens in the next few hours, the close of 2014 will virtually occur right at the low. The bearish candle will be a respectable size of +/- 1870 pips and almost entirely bearish. This is indicating a lot of bearish pressure.
Conclusion: when looking at the above facts and figures, the conclusion is that the probability of more USD bullishness in 2015 is very high. We just need to wait for the 2014 candle to close.
What do you think of analyzing yearly candles?
What is your experience with it?
Thanks for sharing and Happy Hunting!
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