The K-line has the characteristic of figurative thinking that Oriental people are good at. It cannot be quantified like the technical indicators derived from the deductive method in the West, so subjective consciousness often dominates when it is used.
Beginners will inevitably feel confused when faced with various K-line combinations. In fact, the so-called concentration is the essence. We reduce the complicated K-line method to three simple steps, namely, one is to observe the yin and yang, two is to observe the size of the entity, and three is to look at the length of the shadow.
Next, I will tell you about the analysis techniques of K-line charts, hoping to be helpful to you!
A look at Yin and Yang
Yin and Yang represent the direction of the trend. A positive line means it will continue to rise, while a negative line indicates it will continue to fall.
Taking the positive line as an example, after a period of battle between bulls and bears, the closing price is higher than the opening price, indicating that the bulls have the upper hand. According to Newton's law of mechanics, in the absence of external interference, the price will still run in the original direction and speed. Therefore, the positive line indicates that the price will continue to rise in the next stage, at least it can ensure that it can rush upward by inertia in the early stage of the next stage.
Therefore, the positive line usually indicates continued rise, which is consistent with one of the three major assumptions in technical analysis, that is, stock prices fluctuate along the trend, and this trend-following concept is also the core concept of technical analysis.
By the same token, it can be inferred that the negative line will continue to fall.
Second, look at the size of the entity
The size of the entity reflects the internal motivation. The larger the entity, the more significant the upward or downward trend will be, and vice versa, the trend will not be obvious.
Taking the Yang line as an example, its body is the part where the closing price is higher than the opening price. The larger the Yang line body is, the stronger the upward momentum is.
Just like the physical principle that the larger the mass and the faster the speed of an object, the greater its inertial impulse, the larger the Yang line body is, the greater its internal upward momentum is, and its upward momentum will be stronger than that of a Yang line with a small body. Similarly, the larger the Yin line body is, the more sufficient the downward momentum is.
3. Look at the length of the shadow
The shadow represents a turning signal. The longer the shadow in one direction, the less favorable it is for the stock price to change in this direction. In other words, the longer the upper shadow, the less favorable it is for the stock price to rise, and the longer the lower shadow, the less favorable it is for the stock price to fall.
Taking the upper shadow line as an example, after a period of competition between bulls and bears, the bulls ultimately failed to maintain their advantage and failed. As the saying goes, once bitten, one will be afraid of the rope for ten years. Regardless of whether the K-line is negative or positive, the upper shadow line has constituted the upper resistance of the next stage, and the probability of the stock price adjusting downward is relatively high.
By the same token, the lower shadow indicates that the stock price is more likely to attack upward.
