Apple Daily --- 5 Nov, 2000

During the past few months, we have been discussing how to use the Prosticks chart to forecast price movements. In short, we can summarize our applications in the following ways:

• Identify historical significant Modal Points and Modal Platforms, which serve as important future support and resistance levels.
• Monitor directions of money flow using Modal Points distribution at market tops/bottoms
• Draw trend lines using Modal Points instead of traditional high and low points.
• Incorporate traditional technical indicators into Prosticks charting analysis.
• Examine the relative placements among open price, close price, Modal Points, and Active Range, and derive their implications on money flow situations.
• Detect technical traps and false breaks using Active Range.
• Anticipate consolidation breakout and monitor the market demand/supply interaction using Modal Count
• Re-calculate technical indicators (such as RSI) using Modal Points instead of traditional closing price.
• Perform Fibonacci retracements using Modal Points.
• Identify Prosticks generated patterns such as Harami, Double top/bottom.

Remember, Prosticks is not a trading system. It does not tell you whether to buy or to sell. It only provides you information. It is up to you on how to interpret the charting information and make forecast. Two traders looking at the same Prosticks chart may interpret it in different ways and come up with vastly different conclusions. Thus, Prosticks is not the holy grail? It provides you the tools. Whether you can master this tool and beat the market depends on your skills and your experience. There is an old Chinese adage, which says, every monk eats on the same table, but practice individually? The same applies to Prosticks analysis, as well as every other technical analysis tools.

Some readers consider Prosticks a technical indicator such as RSI. This is a misconception. Indicators are derived from charts. For example, the Moving Average and the RSI are derived from the Bar/Candlesticks using historical closing prices. Prosticks is a chart itself. Thus, it is not a technical indicator. However, it can derive thousands of new technical indicators. All the current technical analysis theories are based on the open, high, low, and close prices of Bar/Candlesticks. With the additional elements in Prosticks, a new era of technical analysis can be opened. New indicators and new theories can be derived using Prosticks parameters in collaboration with traditional open, high, low, and close prices. Furthermore, existing indicators can be recalculated using Prosticks parameters also. We have already seen how the RSI and Stochastics can be recalculated using Modal Points which offer dramatically different insights.

The applications, which we have been discussing in this column, are results of our own research. To fully utilities the potential of Prosticks, we need the participation of the whole technical analysis community. We are sure that in the future, as Prosticks gain widespread popularity, gurus and market participants will develop more and more applications. Only then will the theories of Prosticks will be more and more complete.

Prosticks is not an easy chart to read. Some people may complain there is too much information. However, trading is not an easy game. The chart reflects the heartbeat of the market. If one can master this heartbeat, then one will know what the market is telling you and where it is heading. However, this heartbeat chart is not easy to read. All people around the world attempts to discern it but most of them fail in their endeavors. In this aspect, Prosticks help by offering more critical information. With this information, the underlying structure and the inter-relationship among different market forces can be understood more clearly. Moreover, this information is not available in traditional Bar and Candlesticks charts.

Let's wrap up this weekly column by examining our final case study. The figure shows the Prosticks chart of Leading Spirit High-Tech (0606). Notice that A is a reversal bar. Price fell heavily initially but then regained all the territory and closed above the Active Range and Modal Point. For the next few days, price continued to rise. A thus marks the emergence of strong buying forces flowing into the market. Its Modal Point is thus significant. In bar B, price fell to A's Modal Point and then quickly rebounded, showing that the buying forces of A resurfaced at B and continued to support price. The market is poised to rally. During the next two days at C and D, the market consolidated. However, the lows are not able to penetrate below B's Active Range, showing that buying forces at A and B continue to provide buoyancy to the market. Furthermore, while the market was consolidating, Modal Points were in fact rising. At this stage, traders should realize that the market bottom had indeed already formed and an upward explosion is pending.

We hope that after reading this column, readers will get to like Prosticks charting and use them to assist investment in the stock markets. We wish you every success in your trading endeavors. Comments and feedback on either this column or Prosticks charting are welcomed and please email us at info@prosticks.com