License candlestick signals with oscillators and weekly vetoes

A candlestick is a licensed hypothesis

Candlestick patterns are repeatable open-high-low-close formations, including incomplete or rare variants, used to propose a reversal or continuation rather than to stand alone as a trade. Candlestick structure can be combined with mathematically defined Western oscillators, and a computer can apply the combined rules as one strategy.

A stochastic oscillator is a bounded momentum comparison of the close with a recent range, read through %K level, a %K/%D cross, divergence, and overbought or oversold location. Relative strength index is a lookback momentum model that maps ordered closes onto a bounded scale so an overbought or oversold reading can be compared with a candlestick hypothesis.

An incomplete dark cloud can still be a sell hypothesis

The case study plots daily October 1993 live-cattle prices with Williams percent retracement and a stochastic overlay. Williams percent retracement is a range oscillator plotted with price and used to mark stretched conditions around candlestick signals.

Dark cloud cover is a two-candle bearish proposal after an advance. The strict form closes the second black body below the prior white midpoint, while a looser form may close above that midpoint. A dark-cloud-cover variant that closes above the prior white midpoint can still be used as a sell hypothesis when Western oscillator context is added.

Weekly compression recasts daily sessions into weekly candles so a higher-timeframe engulfing, dark-cloud, or thrusting pattern can confirm or reject the daily reading. Compressing the same series to weekly candles produced an engulfing bearish line four days after the incomplete daily dark cloud, treated as confirmation of that sell hypothesis.

From opening bozu to a second-top sell

A white opening bozu that held its open as the session low, closed near the high, and engulfed the prior black body was read as an engulfing bullish reversal and a buy hypothesis. An opening bozu is a long white session that opens on the low and closes near the high, also called a belt-hold, and it is read as stronger if it also engulfs the prior black body.

While that bullish continuation was underway, stochastic %K rose above 60 and the last three candles formed a three-line-star variant of three white soldiers, with a small white candle gapping above the middle body. A three-line-star is a three-white-soldiers variant whose last candle is small and gaps above the middle body, shifting the reading from continuation toward exhaustion.

A long black body on the next session engulfed that star, converting the sequence into a three-river evening star and a second-top sell hypothesis.

A daily bottom that the weekly chart refused

A long-legged doji that matched the prior long black candle's high and low formed a tweezers bottom while stochastics were oversold, and the next session %K crossed above %D. A tweezers bottom is two adjacent candles that share the same high and low, here a long black body followed by a long-legged doji at a contract extreme.

A five-candle anaume that filled a prior downside gap supported a daily bullish-reversal reading. Anaume is a five-candle gap-fill after a directional change, used as supporting evidence that a decline may be exhausting.

The weekly chart showed a thrusting pattern that still looked bearish and did not confirm a bottom. A thrusting pattern is a weekly bearish continuation form that can keep a downtrend reading intact even when daily candles look like a bottom. Editorial: the daily anaume and tweezers bottom remained bounce hypotheses, and the weekly thrusting pattern was the veto.

Continuation candles after a licensed reversal

Reversal candles were treated as stronger hypotheses when oscillators were already overbought or oversold, and continuation candles were used after a reversal to stay with the ensuing trend.