Understanding long black candles

A long black candle is created when the bears seize control at the start of a day and push until the day's end. Figure 5-14 is a picture of a typical long black candle.

Figure 5-14:

A long black candle.

For some quick insight on the numbers involved, have a look at Figure 5-15, which is an intraday chart of price action that creates a long black candle. Keep in mind that the figure is just one example, and that there are several other intraday patterns that can produce a long black candle on a daily chart. Basically, any pattern that begins near the high of the day and ends near the low of the day results in a long black candle, even if the action that got the price to the low occurred in just a couple of the 30-minute bars. The potential intraday action is limitless; the important thing is to know the bears pushed hard and down, and the bulls weren't able to hold up the price.

The most important thing to bear in mind (pardon the pun) is that the long black candle indicates that the bears were in charge for the majority of a day. The day begins with the bears controlling the activity, and it ends the same way.

Figure 5-15:

A 30-minute chart that produces a long black candle on a daily chart.

Figure 5-15:

A 30-minute chart that produces a long black candle on a daily chart.

A useful rule of thumb for the long black candle is that the candle section should cover at least 90 percent of the candlestick. The wicks should be barely visible or completely missing.

The long black candle also usually indicates that many price levels have been covered over the course of one day. A reversal is very possible in the short term, but the long black candle shows the bears are being aggressive and suggests that this aggression will continue.

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