Weekly Trading Lesson: Long wicks near resistance

As the market approaches what we believe may represent our next support or resistance level, the charts may provide us with a number of subtle clues as to the next probable direction or trend. We can see the market tested its recent high prices three successive instances, each time creating a long candlestick wick, before retreating back to the downside. These long wicks indicate that although the buying power was able to force the market price to similar high price levels, the sellers regained control, and did not allow the market to close near its respective high?s. If on the other hand, a candlestick was able to ‘close? its respective trading period near or at the high, those (traders) following that particular pair may gain a greater sense of confidence in their bullish outlook. Furthermore, as each top of the triple top pattern emerged, the MACD (histogram) continued to decline to a greater extent showing a level of ‘divergence? or disagreement between the actual market price and the relationship between the moving averages that make up the MACD indicator. Traders who believe the market will reverse back to the downside may choose to sell short, with protective stops placed above the highs, and perhaps holding the (short) trade open unless the market actually ‘closed? a candle at a new high price. Although we should always keep the ‘big picture? in mind when analyzing the charts, we should also note the subtle clues that are sometimes allowed to us.