How to Read Candlestick Charts?

List of 5 Tips About Price Revealed

A skill that all traders need to hone and strive to improve constantly is how to read candlestick charts. Candlestick patterns of price matter. What price is doing tells a great deal about which Market Participant Groups are controlling price.

The chart example below shows price underlined on the left, at an extreme Angle of Descent™ into the lowest low before a bottom commences.

Even as this final sell down occurs, it is obvious that the steepness of the Angle of Descent is unsustainable. In addition TechniTrader Quiet Accumulation Indicator TTQA in the bottom chart window with red bars, is exposing Smaller Fund capitulation as the stock tumbles.

Understanding how to read candlestick charts is important, in that realizing 5 Tips about price are revealed when you know who is in control of price.

List of 5 Tips About Price Revealed is below:

  1. How price will behave
  2. How price will react to support and resistance
  3. How long price will move in that pattern
  4. What to look for ahead of sudden price moves
  5. When a bottom or top is underway

In learning how to read candlestick charts, see the sideways candlestick pattern after the low which is indicative of the Giant Funds buying in incrementally with controlled bracketed orders in Dark Pools over time. Since some Retail Traders and High Frequency Traders are still trying to Sell Short against the strength of the Giant Funds buying, the up and down day to day price candlestick pattern forms.

Then as the stock moves up to the first tier of resistance around 35-37, the High Frequency Traders realize that Dark Pool buying by the Giant Funds has been going on. So they rush to buy in quickly creating a buzz in the Retail Trader world, and short-term Swing Style Trading occurs. At this time the Giant Funds have accumulated what they wanted, and so the news spreads of their buying.

This creates speculative runs due to emotional At Market buying by Smaller Funds. The stock runs up, and then hits stronger resistance where it stalls. Momentum evaporates and the stock moves sideways in a Platform candlestick pattern, which has a box drawn around it to assist in learning how to read candlestick charts.

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Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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