Candlesticks work great in a trending market. They are used in conjunction with other forms of technical analysis. They also work best at levels previously identified as support or resistance. This is an important point to remember, as candlesticks can help you see if a trend is running out of steam or not. They can also keep you in a trending trade.
Imagine if you were in a trend trade and you were profiting well. Nice! However, price is getting closer and closer to resistance. What do you do: Take profit or let it run? Let’s wait and see.
Price hits the resistance. What happens? Was it riding the 5, 21, or 55? The faster the speed of the market, the more confident you should be that it will break resistance; however, you are still likely to see hesitation or pullback.
So it’s riding the 21. It’s a pretty good market, but it could be exhausting. Now look at the 55. How far is it from the 21? Wide angle and separation between the two shows more strength than flat and narrow. The more strength that appears in the 21/55, the more confident you should be that price will break through the resistance level.
Oh, so the speed of the market is looking like it is flattening? The distance between the 21/55 is diminishing? Your confidence of breaking above the resistance should wane.
Right at resistance, the next candle was a spinning top. No big deal; however, you were expecting price to respect the resistance level. You are worried about a reversal at this level. ...