Our candlestick and trendline charts can provide further clues to future price direction. Japanese candlestick charting is one of the oldest forms of chart analysis. Much older than Western bar charting, it was first used in the Japanese rice markets in the 1600's to determine who was winning the daily battle between the bulls and the bears. Important candle formations at tops and bottoms often signal trend reversals. Gaps in price are also flagged on the charts.
Gaps are important because, sooner or later, prices always move back to fill the gap.
Finally, trendlines formed off of pivot points are shown on the charts and act as important future support and resistance levels. Fibonacci Retracements Leonardo Fibonacci was a 12th century mathematician who was believed to have discovered a naturally recurring ratio in sequences of numbers. Retracements are calculated from recent significant price highs and lows or pivot points. The ratios that appear most frequently in the stock and futures markets are .382, .50, .618, .786, 1.00, 1.272 and 1.618 and are used for both price and time analysis. The slope of each line defines a different rate of change expectation.