The AI (ChatGPT) Stock Investing Handbook: Candle Stick Charts

Here is the response from ChatGPT for the prompt candle stick charts entered on January 20, 2023.

Candlestick charts are a popular way to visualize stock prices and are particularly useful for identifying short-term price patterns. They are based on the Japanese candlestick technique, that was developed by rice traders in the 18th century, but it has become widely used in the western technical analysis.

Each candlestick on a candlestick chart represents the price action for a single day, and it is composed of a "real body" and two "shadows". The real body, which is the thick part of the candlestick, represents the range between the open and close prices for the day. The upper shadow, also known as the "wick" or "tail", represents the highest price reached during the day, while the lower shadow represents the lowest price.

The color of the real body can be either red or green. A red real body represents a negative price change, which means the stock closed lower than it opened. A green real body represents a positive price change, which means the stock closed higher than it opened.

Candlestick charts can provide a lot of information in a simple format and can be used to identify patterns such as bullish patterns (indicating that prices are likely to rise) and bearish patterns (indicating that prices are likely to fall). Some examples of bullish patterns are Bullish Engulfing, Bullish Harami, Bullish harami cross, and Bullish Abandoned Baby. Some examples of bearish patterns are Bearish Engulfing, Bearish Harami, Bearish harami cross and Bearish Abandoned Baby.

It's important to keep in mind that candlestick patterns, like other price patterns, are not always reliable and can be subject to different interpretation, also the stock market is dynamic and influenced by multiple factors such as economic, political or company specific news, it is important to always use them in conjunction with other analysis techniques and take into account the broader market conditions.