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Technical analysis – Chapter I. – Long vs. Short bodies

Sunday, Dec 21 2014
Technical analysis – Chapter I. – Long vs. Short bodies

In this section we will deal with most important candlestick patterns involved in technical analysis. So, one of the type of chart views is candlestick view – in which price movements are presented through series of so called Japanese candles. As presented in the picture candles can either have long or short bodies. Short bodies mean that there is little price movements and that we are entering into consolidation. On the other side long bodies indicate greater price movements. 
 


Long green candles (as in picture) indicate buying pressure. Longer green candles means that opening price is far below from the closing price, meaning that buyers have become more aggressive. This kind of candles are usually buying signal, but we cannot look them in isolation but in more general technical picture. For example, after long period of decline, this kind of candle can indicate that things are turning over and support is being formed.  
 
Long red candles show that there is a selling pressure. Longer the red candle is, further below is the closing price from the opening one, which means that buyers has stepped into markets more agressively.However, after long period of an uptrend this kind of candle can indicate that things are turning over and that resistance is being formed.  
 
In the next chapter we will say more about Marubozu candles and Shadows.

Last modified on Saturday, 01 April 2017
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