Today was a great day to be using Candlestick and volume analysis. There were many setups today that could have been taken, some very high probability,some medium...Looking at a few charts here you may notice something interesting.
First chart May 14th 2007 5min period ER2
Right at the open on a 5 minute chart we see a rejection of price formed by a hanging man candle (red arrow). A hanging man candle shows that although price traded lower during that period long positions were accumulated by some of us and if price trades any lower we might have to liquidate therefore fueling any downward momentum. In the case of a hanging man it is essential like all other candle patterns that you
wait for confirmation. That confirmation was made by a close below the low of the hanging man (blue arrow), basically putting any one who was long in a bad spot. A good place to take profits was when the supply started to dry up and demand began to pick up forming a hammer like candle near the bottom on the swing.
The next pair of red arrows shows us that higher prices are not really making us feel good and we wanted to wait and see what might happen before committing too much money. A few narrow range candles kept us waiting until we finally decide that lower prices is where it's at. This is indicated by a close below the doji (blue arrow).
Second chart May 14th 2007 10min period
Lets look at that second trade on a 10min chart, it's much more clear and is the reason I like to monitor the 5,10,15, and 30 minute charts at the same time. You never know on what time frame the best signal will appear. On this chart we see much more clearly a doji candle form (red arrow) and a close below it (blue arrow) indicate a trigger to sell. It is also very clear that price at that level was not attracting the attention it wanted because volume was like "See ya later, I'd rather be headed South..catch ya' then". Of course if your charts actually talk to you that may be a cause for concern.
None the less I wanted to stress the importance of watching multiple time frames in real time together to find where the clearest signals for that day are being produced throughout the day.
Third chart May 14th 2007 30min period
Speakin' of, remember yesterday where the 30min popped off a doji and never closed above it's last period highs after closing below it? Today it was on vacation and didn't feel like giving much indication at all. The 30 minute time frame trader was left scratching their head while the 5 and 10 minute traders were filling bank bags. Much the opposite of yesterday...
Oh and on a side note some of you may be thinking well that's great but what about all that other action that happened after the moves you pointed out! Well all I can say is that movement really caught me off guard and as I read on Dr. Steenbargers blog earlier today you shouldn't be
confusing market movement with market opportunity.
