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Article: Counting candles. (new record patterns used to determine overextended markets and potential turning points)(Trading Techniques)
- Article from:
- Futures (Cedar Falls, IA)
- Article date:
- June 1, 1996
- Author:
CopyrightCOPYRIGHT 1996 Summit Business Media. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Combining the candlestick techniques of counting successive highs and lows with reversal patterns can help identify overextended markets and potential turning points.
What clues does a market reveal when it becomes overextended and approaches a correction or trend change?
To answer this question, many traders would refer to oversold or overbought oscillator signals. But long before these mathematical studies were created, the Japanese had a simple, direct way to determine when a market was becoming overextended and due for a correction.
This method is a candle pattern called "eight new records" or "eight new price lines," and is formed when the market ...