The hangman candle
, so named because it looks like a person who
has been executed with legs
swinging beneath, always occurs after an extended uptrend The
hangman occurs because traders,
seeing a sell-off in the shares, rush in to grab the stock a bargain price.
In order for the Hanging Man signal to be valid, the following conditions must exist:
•
The stock must have been in a definite uptrend before this signal occurs. This can be visually
seen on the chart.
•
The lower shadow must be at least twice the size of the body.
•
The day after the Hanging Man is formed, one should witness continued selling.
•
There should be no upper shadow or a very small upper shadow. The colour of the body does
not matter, but a black body would be more positive than a white body.
For example = MC
The hammer
puts in its appearance after prolonged downtrend. On the day of the hammer candle,
there is strong selling, often beginning at the opening bell. As the day goes on, however, the market
recovers and closes near the unchanged mark, or in some cased even higher. In these cases the
market potentially is “hammering” out a bottom.
In order for the Hammer signal to be valid, the following conditions must exist:
•
The stock must have been in a definite downtrend before this signal occurs. This can be
visually seen on the chart.
•
The lower shadow must be at least twice the size of the body.
•
The day after the Hammer is formed, one should witness continued buying.
•
There should be no upper shadow or a very small upper shadow. The colour of the body does
not matter, but a white body would be more positive than a black body.
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