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With this video we will discuss bullish and bearish continuation patterns and some practical candlestick application examples.
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Hallo, Sylvain Vervoort with technical analysis part 19. With this video we will discuss bullish and bearish continuation patterns and some practical candlestick application examples. Pay a visit to my website at stocata dot org and have a look at my new book “Capturing Profit with Technical Analysis”. The purpose of this video series is to teach you how to trade successfully applying technical analysis techniques.
A bullish three-line strike continuation pattern in an uptrend, are three or more days of higher prices, followed by a big black candle covering most of the previous bars’ up move. Wait for a confirmation.
You have a rising three continuation pattern in an uptrend with a big white candle that is followed by a number of small, mostly black bodies. The pattern ends with another big white candle with a new high price. This will look many times as a Western pennant continuation pattern, inclusive the break to the upper side.
A separating lines continuation in an uptrend is a black body that is followed by a white body with very close opening prices.
A bearish three line strike continuation pattern in a downtrend are three or more days of lower prices, followed by a big white candle covering most of the previous bars’ down move.
A falling three pattern in a downtrend is a big black candle that is followed by a number of small, mostly white bodies. The pattern ends with a big black candle with a new low price. This will look many times like a Western pennant continuation pattern inclusive the break at the low side.
In a downtrend, a white body that is followed by a black body with the same opening price is a continuation pattern called separating lines.
Let's have a look at trading based on candlestick patterns. Look at this first chart and tell me if you would open a long position here or not?
Well, I would open a new long position here. The bullish harami pattern we are getting here is not yet confirmed. But we have solid support from previous pivot points. The first one is also a hammer pattern and the second one is also a bullish harami. So, actually the bullish harami now is confirmed by previous patterns. You can also use an initial stop here at the level of support that gives you a good risk-to-reward ratio.
And the confidence was rewarded with a 50% price increase!
We have a reaction after an uptrend. We now have a bullish harami cross confirmed by a white candle with a higher closing price. There is also support from a previous low level. Are you buying?
No! You should not buy here. You are exactly at the resistance level of a window. With a stop at around $50 this means a bad risk-to-reward ratio. Especially because there is more resistance just a little bit higher. This is also the first reaction after a bigger medium term uptrend, so probably not yet the end of the correction. You must wait for a better opportunity.
As you can see with the specific case here, the resistance of the window was too strong and price moved further down.
The last three candles are a morning doji star. Should you buy here?
YES! It does not look like an ideal morning doji star, but the third candle reaches just within the first candle and is very important for future resistance; the window between the first and second candles of the morning doji star is already closed by the third candle, so this window has no more meaning. The middle small hammer in the morning doji star confirms a previous window support from half of February; furthermore, you can see a symmetrical triangle price pattern, which mostly is a continuation pattern. Opening a position now, with a stop at the low side of the support window, and a primary price target calculated from the height of the start of the triangle and added to a breakout of the triangle, gives a very good risk-to-reward ratio. These are good reasons to open a position now!
Good arguments made a good decision and gave a very nice profit as you can see following up the price evolution.
This is the end of candlestick continuation patterns and some trading examples. Tell your friends about these videos and while visiting my website you may want to order my new book “Capturing Profit with Technical Analysis”, with a complete trading system based on technical analysis. See you in my next video!
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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