Candlestick Charting For Dummies®

Putting Trendlines Together with Bearish-Trending Candlestick Patterns for Selling and Confirmation

Trendlines are one of the most straightforward technical indicators. If an uptrend is in place, a trendline has a positive slope. If a downtrend is the order of the day (or week or month), a trendline has a negative slope. This concept sounds simplistic, but it can be hugely helpful when you’re trying to determine a market’s trend. If that trend turns out to be down, you can use a downward-sloping trendline alongside bearish-trending candlestick patterns to inform your short trading decisions.

If you’re blanking on trendlines, make a quick flip to Chapter 11, where I discuss them in detail.

Short trades and trend confirmation with trendlines and bearish patterns

Selecting the most appropriate time to get into a short trade can be a trying task. Timing is critical, and any decision-making help can be a real blessing. Luckily for you, considering trendlines and bearish-trending candlestick patterns together can provide just that type of help. I show you what I mean in this section with a couple of real-world examples.

A short trade example with a bearish trendline and candlestick pattern

You can find the first example in Figure 15-1, which features a chart of Altera Corp. (ALTR), a maker of semiconductors that go into a variety of electronic and industrial products.

Figure 15-1: An ALTR chart where a few bearish-trending candlestick patterns and a very long bearish trendline ...