2 Advanced Candlestick Techniques and Analysis

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Transition Among Phases

1

32

1

2 3

B

A

CFlags1

2

3

B

A

CFlags 1

2

3

1

2 3

Breakdown

Patterns

Breakout

Patterns



Rely on confirmation of price action for most potent setups

Look for Topping / Bottoming tails that protrude from the surrounding bars (“really stick

out”

The Candlestick /Bar-by-Bar setups are executed using confluence:

Moving Averages

Support and/or resistance levels

Swing pivot levels and/or floor pivots

Fibonacci levels (retracements of the prior move)

Prior setups and/or “failed” setups

Gaps

Opening Range Highs and Lows



Volume is the second most important characteristic of price action for most potent setups

We want to focus on volume in the context of heavier activity and lighter activity.

Heavier activity indicates volume increasing in relationship to the price action move

Lighter activity indicates diminishing or declining volume in relationship to the price actionmove

The primary focus of volume is to confirm the direction moves of price action, reversal

chart patterns and continuation patterns

Congruency of volume and price action supports or refutes the move in buyers or sellers

Look for linear and non-linear relationships in volume to provide an additional indication of

the setup.

For example, a breakout of sideways consolidation, range-bound or congestion price action should be in parallel with

the directional move



Two schools of thought:

Volume precedes price action – meaning that when volume dries up, price action rolls

over

Volume supports price action – meaning that volume shows up after significant

reversals in price action or momentum changes

We don’t care…which one is right or wrong!

We simply use volume as a compliment and “weight-of-evidence”



Increasing Volume andAnalysis

1

32

1

2 3

B

A

C1

2

3

B

A

C1

2

3

1

2 3

Decreasing Volume andAnalysis



1Morning Session

Aggressive

2Mid-Day Session

Moderate

3Afternoon Session

Diligent

Daily Swing Strategies

(i.e., Bull/Bear Traps)

Higher HighsLower Lows



Opening Range Breakouts Opening Range Breakouts Opening Range Breakouts

2-Bar Reversals3-Bar Reversals

…


…


…



0

Pre Market Session

Extremely

Aggressive

1

Morning Session

Aggressive

2

Mid-Day Session

Moderate

3

Afternoon Session

Diligent

Friday-Monday

Breakout/Breakdown

Prior Day Highs & Lows

Daily Swing

Strategies

(i.e., Bull/BearTraps)

Higher Highs

Lower Lows

Higher Highs

Lower Lows

Higher Highs

Lower Lows

Higher Highs

Lower Lows

Opening RangeBreakouts



2-Bar Reversals

3-Bar Reversals

…

2-Bar Reversals

3-Bar Reversals

…

2-Bar Reversals

3-Bar Reversals

…

2-Bar Reversals

3-Bar Reversals

…



Bullish

Engulfing

Bearish

Engulfing

Bullish

Piercing

Bearish

Piercing

3 Bar

Reversal

3 Bar

Reversal



Bullish

Engulfing

Bearish

Engulfing

Bullish

Piercing

Bearish

Piercing

3 Bar

Reversal

3 Bar

Reversal

Volume

Volume Volume

Volume

Volume

Volume



4)

3 Bar

Opening Ranges(aggressive)

2)

3)

1)

Time-based

Opening Ranges

1/2 Bar

Opening Ranges(most aggressive)



Intraday

3 Bar High3 Bar High

2B/3B

Reversal

2B/3B Reversal &

crosses back into OR

2B/3B

Reversal



1. Price action is trading inside the 3 Bar

Range

2. Look for 2/3 bar reversal inside

“tight range” 3. Look for lower highs in down trends

inside “tight range”

4. Look for higher lows in up trends

inside “tight range”

5. Consider entry after 1st wide-range

bar break outside of the 3-bar range

Identify Market Cycle…

Ignore gaps at open in price action

Consider aggressive short entries

when price action breaks below 3 Bar

low & below 20 MA

Consider conservative short entries

when price action breaks below 3 Bar

low & not below 20 MA

Consider aggressive long entry

when price action breaks above 3 Bar

high & above 20 MA

Consider conservative long entries

when price action breaks above 3 Bar

high & not above 20 MA



Ideal trading

situation

ENTRY

LONG Entry

•Up trend

•Higher Highs & Higher Lows

PriceAction

2B/3B Reversal



Bullish

Engulfing

Bearish

Engulfing

Bullish

Piercing Bearish

Piercing

1st

Bar

1st Bar

1st Bar

1st Bar



Ideal trading

situation

ENTRY

LONG Entry

•Up trend

•Higher Highs & Higher Lows

PriceAction

Higher

Opening Ranges

Stop loss

Entry



Identify Market Cycle on 1 time frame higher

Price action establishes the 1st bar

Consider entry after price action breaks outside of the 1st bar range

Ignore gaps at open in price action Consider aggressive short entries

when price action breaks below 1st Bar low & below 20 MA

Consider conservative short entries (counter trend trade)

when price action breaks below 1st Bar low & not below 20 MA

Consider aggressive long entry

when price action breaks above 1st Bar high & above 20 MA

Consider conservative long entries (counter trend trade)

when price action breaks above 1st Bar high & not above 20 MA



Reference for Candlestick Basics and Analysis



Minor support area

Major support areas



Topping Tail Bottoming Tail

Narrow Range Bar Wide Range Bar



Bullish

Engulfing

Bearish

Engulfing

Bullish

Piercing Bearish

Piercing

50%

50%



Bullish

Reversal

Bearish

Reversal

Variations apply to last two candlesticks

for each pattern

Variation bars

Variation bars

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