Certain signals give
the trader an indication of a weak market or period
of consolidation, these patterns are referred
to as wait and see patterns. Avoiding these situations
can help traders avoid unnecessary exposure until
a clear trend has formed.
Komas
or spinning top
This pattern refers
to the idea that "the trend is not quite
sure where to go". In this pattern the price
did not move much and therefore shows a period
of indecision/consolidation. Buyer and seller
activity was equally matched throughout the trading
day and neither the buyers or sellers have established
a trend.
Tonbo
or dragonfly
This indicates a sign
of trend reversal, yet it still may move either
way. The tonbo or dragonfly differ from the hangman
and hammer in that the open and close are the
same. In a hammer or hangman there is a candle
body.
!
The tonbo or dragonfly differ from the hangman
and hammer in that the open and close are the
same.
Harami
candlestick
The harami is a two
day candle pattern. The first day of the pattern
consists of a long bodied candle either black
or white. On the second day a short opposite candle
is formed. This generates a "wait and see"
signal since it appears that the market is focused
on the first large day, and on the second is waiting
for more information. This is also seen since
there should be lower trading volume on the second
day.
!
This pattern is often mistaken for
an engulfing pattern but it is important to note
the order of the candles.
Haramiyose
candlestick
This two day pattern
is similar to the harami, except it indicates
a reverse in trend. The first day opens with a
tall candle of either color, the second day a
doji candlestick appears. The doji in this case
opens at a different price from the previous day's
close.
The reasoning to wait
when this signal occurs is that the market is
unsure of where to go. The third candle will help
us confirm.
Hoshi
(star) candlestick
The hoshi pattern has
the same candlesticks as the Harami pattern, except
that the second candle gaps up.
Waiting after this
pattern is prudent since there should be a short
correction to help fill the gap.
Shooting
Star
In the case of a shooting
star, it is identical to the hoshi except it has
a long upper shadow. It also signifies a "wait
and see" situation.
Waiting after this
pattern is prudent since there should be a short
correction to help fill the gap.
