≈ Context Matters. ≈
Coach Tyler here.
As we venture into the world of candlesticks, it’s crucial to remember where they lie in the hierarchy of charting. There is a pecking order among technical signals where some matter far more than others. Here is my breakdown, listed in order of importance:
- Trend & Momentum
- Support & Resistance
- Moving Averages
I don’t have as strong of an opinion on the order of three through five. If you want to place candlesticks above moving averages, or volume above candlesticks, then do so. The essential part is that trend, momentum, and support/resistance zones trump candlesticks.
Thus, when analyzing a chart, you must begin by identifying the trend, its momentum, and the next support and resistance levels. Then – and only then – should you analyze candlestick formations.
Otherwise, you’ll forget the forest and overemphasize a single tree.
Here’s a bad example: You find a bull hammer candle, so you buy the stock. Later, when your trade sours, you discover the price was in a downtrend at resistance. No wonder it didn’t work!
Here’s a good example: You find an uptrend with increasing momentum that just pulled back to a major support zone and formed a bullish hammer candle. Then, you buy and make a mint over the next week because you understood how the reversal candle played into the bigger picture.
🛑 Upcoming Webinar – Technical Analysis 101: The Basics of Candlesticks Analysis with Coach Tyler Craig | January 17th, 2022 at 8:30 PM EST on YouTube
You don’t want to miss this webinar. Set an alert, clear your calendar, and get ready for an insightful discussion on technical analysis that will help you take your chart reading and your trading skills to the next level.
In this webinar, you are going to learn:
✅ Why Candlesticks are our preferred form of charting.
✅ How to craft a candlestick
✅ The basics of bullish reversal candles
✅ The basics of bearish reversal candles
✅ Understanding candlesticks in the context of the trend
Click on the button below to go to YouTube and set a reminder so you won’t miss it when Coach Tyler goes LIVE.
Video of the Day: Trading Concept Check: Big Candles vs. Small Candles
In this video, Coach Noah talks about candle size and momentum using Valero ($VLO) as an example.
Chart of the Day: $ARKK Hammer Candle
The Ark Innovation ETF ($ARKK) formed a bullish hammer candle on Monday. If you bought it, then good luck. You’re going to need it. The trend is down and is increasing in momentum. What’s more, there is significant resistance overhead at $90, and the recent volume showed heavy distribution.
Today’s Line up
Traders Lounge 11 PM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cashflow Club 8:30 PM EST
Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
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