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Hugo in HTO Trading,

Gauging momentum | Candlestick close comparison

This is the third of a four lesson course

Comparing the current candle close with the previous candle range is an important part of its sentiment. However it also should be read in what context the candle has its sentiment to truly determine its meaning.

  • Bullish candle is one which closes above the high of the previous candle.
  • Range candle is one which closes within the previous candle range.
  • Bearish candle is one which closes below the lows of the previous candle.

The close comparison (two candles pattern) combined with the close position (single candle pattern) will help us to determine the different degrees of bullishness, neutrality or bearishness.

Pattern (a) is a High Close Bull Candle. Both the high close and the bull candle components represent bullishness. Combined, these two indicate strongly bullish sentiment.

In (b) we see a Low Close Bull Candle. It closed above the previous high, but higher prices were clearly rejected driving price to close near the low of the last candle. We have bullish sentiment (bull candle) combined with a bearish sentiment (low close). This is a weak bullish move.

Looking at (c) for example, we see a High Close Range Candle. The latest candle is a high close candle, closing near the highs. Individually this appears bullish, but comparing it with the previous candle we see fact that the high close candle is simply retracing approximately 50% of the previous strongly bearish low close candle. Combined, this is probably slightly on the bearish side of neutral.

The example (e) shows a High Close Bear Candle, which has clearly rejected lower prices and closed up at its highs. Still bearish, but showing some sign of bullish strength opposing our bearish sentiment. This two candle pattern displays weak bearish sentiment.