Post of the Day: Wicked Candles

[B]Student’s Question:[/B]

I like the idea of using longer wicked candles to identify a potential trade. My question is what exactly are you looking for in terms of a “long” wick? Thanks.

[B]Power Course Instructor’s Response:[/B]

[B][/B]

The wicks that you are looking for can be identified in a couple of ways: they are long relative to the body of the candle and they are long compared to other wicks on the chart.

Take a look at the chart below for a visual…

A long wick on the bottom of a candle, for example, indicates that the sellers had pushed the price down quite a bit during the course of the candle’s time frame but they were not able to sustain the low that is indicated by the low point of the wick. Since sellers were not able to maintain that level and price closed quite a bit higher than the low, there is a greater likelihood that buyers will continue to be the influencing force and will push the pair higher. The opposite would be true in the case of long wicks on the top of the candle.

Bottom line: Long wicks to the downside indicate a potential for the pair to move higher. Long wicks to the upside indicate a potential for the pair to move lower.

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