Part 2 – Lots of candles
In this section, we read the price action through a cluster of 2 candles and 3 candles
I.The cluster of 2 candles. When reading the candles, we need to compare the current candle with the previous candles to find the next direction of the market
1.Smaller range – Decreasing volatility.show that the volatility has decreased through decreasing candle size.
2. Longer upper shadows – Increasing selling pressure.indicating that selling pressure is increasing as the candlestick forms a long upper shadow.
3. Larger range and opposing bodies – Increasing volatility and market reversal.indicates the increase in volatility as it reverses down
Retest the previous price.
1. Test high but falled – Bearish.The price broke out high but was later denied and created a bearish candlestick
2. Tested low and punched through – Bearish.The lower candlestick penetrates the low of the previous candlestick with a strong force, indicating a bearish momentum
3. Tested low but failed – Bullish.The price initially penetrated the previous low but ended up with a bullish candlestick
II.Cluster of 3 candles.Basically, the market is inertial. Price increases will entail price increases and vice versa or a reversal
1. Bearish expectations confirmed.The first day is bearish with a strong force, the second day also plummets after opening, we expect the third day’s candle will follow this decline. In fact, the 3rd day has a rising gap but is pushed down shortly thereafter creating a bearish candle.
2. Bearish expectations failed.The first two bars are the opposite of the first one, but the third bar is rejected when approaching new highs, which shows that the selling pressure has increased. A bearish setup
3. Bearish expectations failed.The middle bar fell sharply, completely eliminating the previous uptrend. We expected the price to decrease further, but this was not true, this price zone was going on a struggle.