- As mutual fund prices are based only on the closing price
and candlestick charts require the open, hi, low and closing prices. Japanese charts, like
Renko, are particularly useful for analyzing stock mutual funds.
- Easy to interpret bullish and bearish signs in the stock.
The Renko chart looks similar to the Three-Line Break chart since they both have blocks.
The individual blocks that form the renko chart are sometimes referred to as bricks. For a
renko chart, a block is drawn in the direction of the prior move if a fixed amount has
been exceeded. For example, if there is a white brick on the renko chart, the stock has to
advance by a predetermined fixed amount before a new white brick can be drawn.
Important Bibliography: Of all the text books that described Japanese Charting techniques.
We found the best to be:
- "Beyond Candlesticks", written by Steve
Nison. John Wiley Sons, Inc., New York, NY, 1994
We strongly encourage the use and reading of this book as
it fully describes Japanese Charting techniques with pattern analysis and illustrative
A Renko chart is depicted in the following figure:
Renko charts are always based on closing prices. The general rules for calculating a kagi
- If the closing price falls below the bottom of the
previous brick by at least the box size, one or more black bricks are drawn in new
columns. Again, the height of the bricks is always equal to the box
There are other rules and
considerations when building Kagi charts. If you want to know the specifics, We strongly
encourage you to obtain a copy of "Beyond Candlesticks", written by Steve
Nison. John Wiley Sons, Inc., New York, NY, 1994. ISBN 0-471-00720-X
- If prices move more than the box size, but not enough
to create two bricks, only one brick is drawn. For example, in a two-unit Renko chart, if
the prices move from 100 to 103, only one white brick is drawn from 100 to 102. The rest
of the move, from 102 to 103, is not shown on the Renko chart.