last week something interesting happend, i would like to know what other traders think about it.
Normally i dont rely on candle patterns, in this case a certain formation jumped in my eyes, in combination with other factors which led me to open a short-term correction trade.
The candle pattern my be defined as a hammer with following conformation candle, or a kind of morning star with a hammer in the middle.
The following candle of the hammer was no doubt a conformation of a possible up move.
In adition RSI and Stochastik in the oversold area began to bend upwards, and also ADX started to bend downwards, showing that the downmove temporarily couöld loose speed and a short corection could happen.
So those three facts led me to the decission, to speculate on an up move next bar after the long one, and grap again some up-pips.
How would others interpret this situation? (After some answers i will unheal what happend … )
But according to the technical rules the nice green up-candle after the hammer should say it’s going up, and this up-turn is supported by Stoch, RSI and ADX…
Apart from the scalping opportunity on a 5 minute chart, if it was a currency pair, I would surmise the long wick candle shows that the bears are struggling to continue the downtrend, although the Ichimoku is still very bearish. I would use MACD & PSAR as a confirmation signal - and the RSI, being over 50%, indicates an upward trend.
However - although I don’t trade indices - doesn’t the Nasdaq ‘usually’ follow the same trend as the DAX, DOW & FTSE. If so, there’s another consideration to take into account.
Overall, on this time frame, there’s enough contrary indications to wait and see if the next candle following the long wick hammer is the beginning of a short retracement, or a continuation. If in doubt, don’t trade.
Well, as i mentioned usually i dont look on candles, it was more an “experiment out of the stomache”, which i wont repeat in nearer future…
that candle (red circle) followed the " confirmation upwards candle": a sharp down candle which costed me at first some money, and than some hours “working” to regain the loss:
Yes, I know that, but as ADX began to bend downwards I saw it as trend is weaker (as in the schoolbooks described) which may support the bullish candle…
I hear what you’re saying. Text books on trading are fill of gorgeous examples of reversal trades from 45 degree trends. I think they should be on a banned books list.
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