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The stock symbol UNG (United States Natural Gas Fund) is two candles into an abandoned baby pattern. Those of you that know this pattern, also know that it is very rare and very strong. Another possibility is the Morning Doji Star pattern, which is also a strong buy signal. Best of all, the doji was formed during a high volume trading day which means an upward gap would leave short sellers with losing trades. I hope this gaps way up for Tuesday so I can scoop it up.
Look for this pattern to complete itself by Monday. Resistance and stop loss for this trade are at $13.70 be sure to consider the risk before opening the trade. Update for this trade will be on Tuesday at around 3:00pm. What is an Abandoned Baby Bottom?An abandoned baby is a three candle pattern which works out like this. Day 1 - Down day during a downward trend. Day 2- Large downward gap forms a doji or spinning top whose shadows don’t overlap with first or third day’s Day 3- Large upward gap and strong bullish candle which pierces well into the first day’s territory. Stop Loss is set at the second day’s close/open. This pattern works because the doji signals a slowing of momentum for the bears. Then the next day ann aggressive upward gap and bullish candle destroy what is left of the downward trend. This sudden shock can give way to both short and long term reversals. Today’s Japanese candlestick pattern is called the “Hanging Man”. It is a reversal pattern that is often found at the peak of an upward trend.
Here is a chart which belongs to UNG (United States Natural Gas Fund). Can you spot the hanging man and the confirmation? What is the stop loss?
Hanging man picture is credited to Steve Nison, author of Japanese Candlestick Charting Techniques 2nd Ed.
The most important thing to know about Japanese candlesticks is how to read them. Japanese Candlesticks usually come in two different colors. One color which represents an up day, and a second color which represents a down day. Most trading programs allow you to change the color of your bull and bear candles at will. Below are two different colored candles, in this example the black candle represents a down day and the white one an up day.
As you can see in a black candle’s real body, the open is above the close. This means that the market opened higher than it closed in price. Traders call these candles bear candles, or bearish candles. The white candle is the exact opposite with the open way above the close representing a rise in price for that instrument. Both candles also have lines drawn above and below them, which represent the highs and lows for the trading period. Now for an example of Japanese candlesticks in use. Examine this unlabeled chart and see if you can spot any patterns.
All pictures in this post are credited to Steve Nison, author of Japanese Candlestick Charting Techniques 2nd Ed. |
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I am not a financial adviser. Trade using your own research and at your own risk. Thank You. |
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