Pressure & Rejection Candle
Pressure Candle
Pressure candles, often referred to as "momentum" or "continuation" candles,
indicate that there is sustained pressure in one direction, either buying or
selling, suggesting a continuation of the current trend.
Characteristics of Pressure Candles:
Large Body: These candles typically have a large body relative to the
candles around them, indicating strong buying or selling activity.
Color: A bullish pressure candle is usually green or white, indicating that
the close was significantly higher than the open. Conversely, a bearish
pressure candle is red or black, showing that the close was significantly
lower than the open.
Small or No Wicks: Pressure candles may have very small wicks or none at
all, signifying that one side (buyers or sellers) dominated the trading
session completely.
Implications:
Bullish Pressure Candle: Implies that buyers are in control, potentially
leading to higher prices in the future. Traders might consider taking long
positions.
Bearish Pressure Candle: Suggests that sellers are dominating, which
could lead to lower prices. Traders might consider taking short positions.
Rejection Candle
Rejection candles, also known as "pin bars" or "hammer" candles depending
on their specific shape and position, show that prices moved significantly
beyond the body of the candle but then snapped back, indicating rejection of
higher or lower prices.
Characteristics of Rejection Candles:
Small Body: These candles have a small body at one end of the candle.
Pressure & Rejection Candle 1
Long Wick: A key feature is a long wick that extends from the body,
representing a testing of prices either above or below the body but ending
close to the opening price, suggesting a rejection of those extremes.
Placement: The placement of the wicRejectik is crucial. A long upper wick
shows rejection of higher prices, whereas a long lower wick shows
rejection of lower prices.
Implications:
Rejection of Higher Prices: If the candle has a long upper wick and closes
near its low, it suggests that although buyers pushed the price up, sellers
countered by pushing it back down, rejecting the higher price level.
Rejection of Lower Prices: Conversely, if the candle has a long lower wick
and closes near its high, it indicates that sellers drove prices down, but
buyers came back strongly to close the candle near its high, rejecting the
lower price level.
Bullish Rejection Candle
A bullish rejection candle, often called a "hammer" if it appears during a
downtrend, is characterized by a small body at the top with a long lower wick
and little to no upper wick. This pattern signifies that although the price was
pushed down during the trading period, the bulls were able to reject this
bearish advance and close the price near the high of the session.
Implications:
Market Sentiment: It signals strong buying pressure after a price dip.
Essentially, buyers are entering the market at lower prices, believing the
asset is undervalued, which pushes the price back up.
Price Action: This is often observed at the bottom of a downtrend and can
be a signal of a potential reversal to the upside.
Psychological Element: It reflects a change in sentiment where bears fail to
maintain control, and bulls begin to take charge, reflecting a shift in market
dynamics.
Bearish Rejection Candle
Pressure & Rejection Candle 2
Conversely, a bearish rejection candle, often seen as a "shooting star" in
uptrends, has a small body at the bottom with a long upper wick and little to no
lower wick. This pattern indicates that although the price was pushed up during
the trading period, sellers entered the market at these higher levels and drove
the price back down to close near the low of the session.
Implications:
Market Sentiment: It suggests strong selling pressure following a price
rise. Sellers believe the asset is overvalued at higher prices, leading them to
drive the price back down.
Price Action: This pattern is typically found at the top of an uptrend and
can indicate a potential reversal to the downside.
Psychological Element: It reflects a scenario where bulls fail to maintain
higher prices, and bears start taking control, signaling a shift towards
bearish sentiment.
Trading Strategies
Entry Points: For rejection candles, traders might consider entering a trade
based on the direction of the rejection. For example, buy after a bullish
rejection candle that rejects lower prices, especially if it occurs at a key
support level.
Confirmation: Traders often wait for confirmation from subsequent candles
or additional indicators (such as RSI or MACD) before making a trade based
on a rejection candle.
Stop-Loss and Take-Profit: It's common to place a stop-loss just beyond
the rejected price levels indicated by the wick of the rejection candle. Take-
profit levels may be set at previous resistance (for buys) or support levels
(for sells).
Conclusion
Understanding pressure and rejection candles can significantly enhance a
trader's ability to read market sentiments and make informed decisions. These
candles highlight the dynamics of market pressure and price rejection, which
are critical to forecasting future price movements. Traders should use these
signals in conjunction with other technical analysis tools and sound risk
management practices to optimize their trading strategies.
Pressure & Rejection Candle 3
