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CANDLESTICK CHARTING


Krispy Kreme Marches Up

02/08/02 01:49:22 PM
by Sharon Yamanaka

With the formation of the candlestick charting pattern "three white soldiers" Krispy Kreme looks like it's headed back up.

Security:   KKD
Position:   Buy

Another temporary casualty of the Enron scandal, Krispy Kreme (KKD) stock took a sudden downturn on February 5, when the technicalties of their new leasing agreement were pronounced questionable by Forbes magazine. But in the following days, the stock has rebounded, and formed a candlestick pattern known as "three white soldiers." This is classed as a significant and positive indicator of a trend reversal, and Krispy Kreme seems destined to continue upward, perhaps topping out at 40.

The three white soldiers pattern has the following characteristics:

1. Three consecutive long, white bodies, each with a higher close.
2. Each successive candlestick should open within, and preferably above, the halfway mark of the previous day's body.


KKD produced the third candlestick of the three white soldier formation on February 7, 2002, albiet with a long tail on the first soldier.
Graphic provided by: Bigcharts.com.
 
But how important is an indicator that tells you your stock is going up when. . . well, your stock is going up? This particular pattern tends to occur during a strong, steady upward movement, as shown by the length and overlap of the candlesticks's bodies. In Greg Morris's "CandlePower," he rated the effectiveness of candlestick formations for three-, five-, and seven-day intervals. He found a whopping 75% average effectiveness rate on the classic three white soldiers formation. This is an amazing,if hard to believe, statistic in an arena where any indicator above 50% accuracy is considered tradable, thus placing this formation in the high end of reliability.

Krispy Kreme's stock follows a somewhat predictable pattern. It has been shooting upward following Quartery Earnings reports. These reports have been consistently exceeding analysts' predictions, and the stock has responded by going upward for $5-10 with the P/E ratio exceeding 100. At that point, a selloff occurs and the stock's price drops, losing maybe half of its recent gains, only to start back upward again--a classic upward trending stock.

Krispy Kreme's next Quarterly Earnings report is due out on March 8--Look for KKD to have an immediate and explosive reaction to the numbers.




Sharon Yamanaka


Title: Staff writer
Company: Technical Analysis, Inc.
Website: www.traders.com
E-mail address: syamanaka@traders.com

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Comments

Date: 02/13/02Rank: 3Comment: Hi I do not know about Candil sticks, much. But what I see a rising wedge that broke downwards. plus multiple Head and sholder Tops. all this it shows that this stock going down to $27 area. hope you accept my comments.
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