Japanese Candlestick financial price recordation was invented in the rice trade centuries ago, in Japan, of course. A successful rice trader took it upon himself to devise a system which could give him clues about the mindset of his rival traders. He calculated that if could know that, he would have an advantage. The system which he formulated consisted of a vertical line showing the price range of the previous day; the open price, and the closing price. The price area between the open and the close he fattened-out into a hollow cylinder. If the close were higher than the open, the cylinder would be left unfilled, or “white.” If the close were lower than the open, then he would fill in, or blacken-out, the bulge. This device made it easy to see the direction of price movement. He noted also that price action tended to produce more than one specific candlestick formation which, more often than not, turned out to have predictive ability.

These formations (”patterns”) were given particular names in order to identify them as individuals in their own right. Some of those names have remained with us in the original Japanese; some have been translated into English. It has been found that each candlestick formation has a personality and price-predicting power all its own.

The Candlestick literature speaks at length about many of these patterns, but nothing - or almost nothing- is said about the origin or timing of their names. Does one properly assume that these names were assigned to the patterns at the beginning, that they became fixed - and limited - in number as the years passed? If so, why should they be limited? Have any new ones been recognized and named over time? Is it not possible that as the art progresses, a new candlestick formation - or two, or five, or a dozen - will be identified and become part of the pantheon? Whoever ruled, or has the power or authority to rule, that time is in a bottle in this respect?

Let’s take a look at the Morning Star Candlestick reversal pattern, for example. It consists of three price bars, and will be found at the bottom of a long downtrend. The first bar is a tall black candle, denoting a strong Down day. The second bar will show a tight range of prices between the open and the close, near or below the closing price range of the tall black candle of the previous day. That middle pattern is called a “Star,” and may exhibit a wide range of prices between the high and the low, even though the closing price is the same or nearly the same as the opening price. The tightness of the range of prices between the open and the close indicates that traders were “reining up” the galloping horse, taking a second look after the strong downtrend. They were “taking a breather.” This was an early warning of a possible change in trend. The third of the three Morning Star bars will be a tall white candle, denoting a 180-degree turnaround in sentiment from bearish to strongly bullish. “How strange the change, from minor to major.” The entire three-bar pattern often leads to a strong runup in prices.

This is exactly what happened in March 2009, except that the candlestick formation which predicted the rise was not a standard Morning Star. Instead of three bars, it had four, including two Stars in the middle instead of only one. The proof is in the pudding: the formation led to the greatest rally in many years. So, what do we do about that powerful formation? Do we settle on calling it a “variation on a Morning Star,” and leave it at that? I say No; that it is a distinctive Candlestick formation in its own right, that it deserves recognition as a legitimate Candlestick Reversal Pattern, and that it ought to have a name of its own. I propose “Tokyo Express.”