High Probability Candlestick Patterns
& Set ups
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Utilize easy mechanical trades that remove the guess-work from trading. Opportunities to profit in Breakout Gaps and how to handle Bad News Gaps. See the difference between healthy profit-taking and a full-scale reversal ahead.
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Fry Pan bottom patterns Dumpling Top Cradle pattern
Jay-hook pattern Scoop pattern
Belthold patterns Gaps
Fry Pan Bottom
• The downtrend starts waning with the appearance of small trading bodies.
• As the trend starts slowly curling up, a gap up in price indicates that strong buying sentiment has now returned.
Fry Pan Bottom Measuring Point
A dimple usually marks the Halfway point
Classic
What is expected coming out of a Fry Pan Bottom?
Fry Pan Bottom
A slow build up of Investor sentiment
PRXI
Fry Pan Bottom
MBI Fry Pan Bottom
The Breakout is the signal
PRXI
Fry Pan Bottom
Fry Pan Bottom Breakouts
OCZ – J-Hook
J-Hook
Looking For the Big Moves
J-Hook Set Up
AFFY- Long Legged Doji
Long Legged Doji shows major Indecision
AXP Kicker
A Kicker signal that sets up a J-hook
SSH Kicker
Expected results
•www.candlestickforum.com
Common Price Movements
Easy to spot support & resistance price targets
T-Line EA Breakout
Breakout Steady Eddy Best Friend
Blue Ice Failure Left/Right Combo
Slow Curve
EA Breakout
CS make pattern break out Identification easy
Blue Ice Failure
HERO 3 wave
Where are the big money investors watching for a support?
Support
Candlestick Signals provide a visual advantage
CBI BO steady eddie
T-line provides a comfort
BF down and up
Candlestick Signals and gaps = your best friend
Support
Morning Star signal
Bidu Short ? ! Obvious Resistance
Doji on 50, sandwich
Rule of the Doji
Series of Doji’s
This is telling you something
What are the signals and patterns looking for?
What Are We Looking For?
Big Gains %80
Left/Right Combo
Stay Short
Slow Curve
Exit strategy
INVN RB
Doji Rule
EA FP
What is this telling us?
Fry Pan Bottom Breakouts
Simple entry strategy, Set buy stop
DANG
A Breakout is obvious
Expected Results
BONT 100% plus gain
Fry Pan Bottom – minutes, days, months
The indecisive rounding bottom is the predominant factor
TSPT FP
•www.candlestickforum.com
Rounding Bottom or
Slow Curve
Slow Curve
T-line Crunch
Slow Curve
A build up of investor Bullish sentiment
SPWR
Bought this week
Sold 1/2
?
Jan 8, 2013
Slow Curve
Strong Option Trade set ups
FSL RB
High probability results
BIOL Slow Curve
Obvious Break Out Level
Slow Curves
DEPO RB now what?
What is possibly setting up?
Slow Curve
Slow Curve
Buy Entry
Rounded Bottom BO
IMUC Rounding Bottom
The pattern sets up with signals
JKHY Rounding bottom
When to Buy
Excellent for option trades Closed option position at $8.70
Bought Jan 75 calls @ $2.40
FOE Rounding Bottom
Buy Here
T-line Crunch
Classic
KKR Classic
What is expected after a Fry Pan Break out?
LOW Classic Set Up
Dumpling Top
AMED – Short with the Market
Dumpling Top
FRAN – Short to a Target
FRAN- Breaking thru support Where is likely target?
Cradle Pattern • The Cradle Pattern is a symmetric
bottom pattern that is easy to identify.
– A downtrend becomes obvious with a large black candle at the bottom.
– A series of small or indecisive trading days trade in a flat area.
– A bullish candle, more powerful with a Bullish Engulfing signal, is formed of approximately the same magnitude as a Bearish candle at the end of the downtrend.
• This signifies that the Bulls have come out of the indecisive trading area with decisive force.
Cradle Pattern
Cradle Pattern
NSM Cradle
Cradle and a close above the T-line
Cradle Pattern
Cradle Pattern
How to identify pullbacks versus reversals
•www.candlestickforum.com www.stephenbigalow.com
Helps to differentiate between profit taking and a full-scale reversal
Jay Hook Pattern
Jay Hook Pattern
• The first move of the uptrend is very strong.
• A candlestick sell signal
indicates a pullback about to occur.
• After a few days, small indecisive candles start to appear – Doji, small Hammers,
Bullish Engulfing signals
Jay Hook Pattern • The first test becomes the
recent high
• Indecision as found in candlestick sell signals at the recent high becomes a quick indicator to get out of the position
• A Bullish candle breaching the recent high illustrates that investor sentiment is taking prices up
J Hook
What do the candle formations say on The pull back?
J Hook
Buy Points
FOSL Spread Strategy
J Hook great for option Spread trades
Best F – J Hook
Why is a J Hook anticipated?
J Hook
J Hook
Gap up to resistance
J Hook Break out
Scoop Pattern
• An extended flat trading area – Followed by a pullback
• Buy signals bring price back up to flat trading range
• Once price breaks above flat range, look for strong uptrend
Scoop has expected results
Scoop Pattern- Completed
Scoop pattern - Do not scan for a Scoop
Scoop Pattern use it to Analyze
Scoop Pattern - What should happen upon confirming?
Scoop Pattern - A strong trend to potential targets
Scoop
TSPT Scoop
DWA Inverted Scoop
15 22 31 5November
12 19 26 3December
10 17 24 312013
7 14 22 28 4February
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23.5Dreamworks Animation SKG Inc (16.2900, 16.3900, 16.1600, 16.2301, -0.07990)
Belt Hold Pattern • Strong prevailing trend • The candlestick body
should be the opposite color of the prevailing trend
• Gap on the open, continuing the trend
• The open is the high or low of that trend
• The length of the body should be a long body.
Belt Hold
15 22 31 5November
12 19 26 3December
10 17 24 312013
7 14 22 28 4February
11
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4.354.404.454.504.554.604.654.704.754.804.854.904.955.005.055.105.155.205.255.305.355.405.455.505.555.605.655.705.755.805.855.905.956.006.056.106.156.206.256.306.356.406.45
4.354.404.454.504.554.604.654.704.754.804.854.904.955.005.055.105.155.205.255.305.355.405.455.505.555.605.655.705.755.805.855.905.956.006.056.106.156.206.256.306.356.406.45
Kite Realty Group Trust (6.34000, 6.34000, 6.10000, 6.26000, +0.06000)
The Deeper the open…
KCAP Belt Hold
15 22 31 5November
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Kohlberg Capital Corp (10.1600, 10.2500, 10.0400, 10.1960, +0.07600)
Belt Hold
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57Herbalife Ltd (36.0100, 36.4100, 35.4600, 35.7900, -0.13000)
ESI Belt Hold
15 22 31 5November
12 19 26 3December
10 17 24 312013
7 14 22 28 4February
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22.5ITT Educational Services Inc (17.8000, 17.8000, 16.9600, 17.1900, -0.62000)
BECN
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7 14 22 28 4February
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38.0Beacon Roofing Supply Inc (34.7500, 37.8000, 34.1900, 36.8487, -0.02130)
Belt Hold
When to take profits
What Pattern set up?
EOX J Hook?
What should we be looking for?
Belt Hold
Belt Hold - Adds strength to existing trends
Belt Hold – shows the sellers are flushed out
Belt Hold – gets rid of the last of the sellers
Belt Hold
The bigger the Signal!
•www.candlestickforum.com
Easy Trend Analysis
Dow
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Dow Jones Industrial Average (13,944.05, 14,022.62, 13,944.05, 13,991.54, +47.4902)
?
Looking for the Big Moves
J Hook Set Up
Hitting the Big Ones
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10.5Keryx Biopharmaceuticals Inc (6.75000, 6.90000, 6.57000, 6.65000, -0.04000)
KERX - two weeks ago
Trading Gaps
Gaps represent enthusiasm to get into a
position to the point that investors will pay prices away from any of the previous day's trading range. Great for identifying panic selling at the
bottom and exuberant buying at the top.
TRADING GAPS What is the definition of a GAP?
• Gap or ‘window’ occurs when there is a ‘gap’ in price within a specific time frame.
• In a rising chart, it illustrates prices opening higher than previous trading range. The buyers have stepped in with great enthusiasm.
• In a declining chart, it illustrates prices opening lower than previous trading range. The sellers are getting out at any cost.
Four Basic Gaps
Gap Up at Top
Gap Down at Top
Gap Up at Bottom
Gap Down at Bottom
Two show EXHAUSTION
Gap Up at Top
Gap Down at Bottom
A Gap at bottom get in, a Gap at top get out
Gap Up at Top
FSYS, -exuberance
Gap up at Top, Start looking for selling
AFFY – Doji after gap up at top
A gap up in overbought conditions make it time to watch for a sell signal.
EXHAUSTION
AGEN Gap up Doji at top
A Gap up in the overbought area, start watching for a candlestick sell signal
Spinning Top = WHERE?
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