Dragon fly doji develops when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a “T” with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.
Doji are important candlesticks that provide information on their own. Doji line develops when a security’s open and close are virtually equal. A doji is a key trend reversal indicator. This is particularly true when there is high trading volume following an extended move in either direction.
Gravestone doji’s form when the open, low, and close are equal, and the high creates a long upper shadow. The resulting candlestick looks like an upside down “T” with a long upper shadow and no lower shadow. The long upper shadow suggests that the direction of the trend may be nearing a major turning point.
The Falling Three Method is a bearish continuation pattern. The opposite of the bearish Falling Three Methods pattern is the bullish Rising Three Methods.
The first day’s red candlestick is followed by a group of small candlesticks, which hold within the long red candlesticks range. The small candlesticks can be any color but green is the most common. The final day is a strong red candlestick with a close below the first day’s close. The formation represents a rest before resuming the bearish trend, which is similar to Flag or Pennant formations.
Bearish Side by Side White Lines pattern is a bearish continuation pattern. The first candle is a red one and the next two are green candles. The second candlestick opens with a gap below the first and the third one is similar size candlestick that opens near the second one.
Side by Side White Lines appears in a bearish market. The first candlestick confirms the continuation of the bearish market. The second and third days are failed attempt to reverse the downtrend.
- The similarity of the last two candlesticks is important.
- If on the third day there is heavy volume.
In this post we go over Gap Trading; types of gaps, tips, and how Daily Stocks Pro can help you be a better Gap Trader.
Gaps are unfilled areas on a chart, in other words, an area where no trading takes place. A Gap can be either up or down and generally it is news driven.
Gaps are significant; there are many ways to take advantage of gaps. Some market speculators trade when fundamental or technical factors favor a gap and some fade gaps in opposite direction once a high or low point has been determined.
There are four types of gaps (source: wikipedia):
Breakaway Gap: It occurs when prices break away from an area of congestion. When the price is breaking away from a triangle (Ascending or Descending) with a gap then it can be implied that change in sentiment is strong and coming move will be powerful. One must keep an eye on the volume. If it is heavy after the gap is formed then there is a good chance that market does not return to fill the gap. When the price is breaking away on a low volume, there is a possibility that the gap will be filled before prices resume their trend.
Common Gap: It is also known as area gap, pattern gap or temporary gap. They tend to occur when trading is bound between support and resistance level on a short span of time and market price is moving sideways. One can also see them in price congestion area. Usually, the price moves back or goes up in order to fill the gaps in the coming days. If the gap is filled, then they offer little in the way of forecasting significance.
Exhaustion Gap: Signals end of a move. These gaps are associated with a rapid, straight-line advance or decline. A reversal day can easily help to differentiate between the Measuring gap and the Exhaustion gap. When it is formed at the top with heavy volume, there is significant chance that the market is exhausted and prevailing trend is at halt which is ordinarily followed by some other area pattern development. An Exhaustion gap should not be read as a major reversal.
Measuring Gap: Also known as Runaway Gap, a Measuring gap is formed usually in the half way of a price move. It is not associated with the congestion area; it is more likely to occur approximately in the middle of rapid advance or decline. It can be used to measure roughly how much further ahead a move will go. Runaway gaps are not normally filled for a considerable period of time.
Things to remember:
- Once a stock has started to fill the gap, it will rarely stop.
- Be sure that you correctly classify the gap. e.g. Exhaustion and Measuring Gaps predict the price moving in different directions.
- Be patient; wait for confirmation before taking a position.
- Be sure to watch the volume.
Daily Stocks Pro and Gap Trading
Daily Stocks Pro scans all US stocks for Gaps in real-time. If you are a day trader, you can use the constantly updating list to identify different type of gaps and trade by favoring or fading these gaps. If you are a swing trader, you can wait for the market close for your end-of-day gap trading strategy.
Please note that Daily Stocks Pro also provides auto Fibonacci lines. This is significant in Gap Trading since gapping a stock that crosses above resistance levels provides reliable entry signals. Similarly, a short position would be signaled by a stock whose gap down fails support levels.
Here are some screenshots from Daily Stocks Pro:
The Bearish Harami pattern is a small red candlestick, which is contained with a prior relatively long green candlestick, it is the opposite of the Bullish Harami pattern. The formation is comparable to Inside Day pattern (see NR4 ID). The pattern is more significant if the second candlestick is a Doji. The Harami pattern without a Doji is usually not as significant of a reversal signal as the Engulfing pattern.
The heavy buying is reflected by first day’s long green candlestick, and then it is followed by the small red candlestick which implies uncertainty. This could indicate a trend reversal since the bulls’ power has diminished.
- The smaller the second candlestick the stronger the reversal signal.
One of the best new features in Daily Stocks Pro is the Reversals trading model which runs in real-time.
Below are two screenshots from Thursday August 8, 2013 to show the effectiveness of the Reversals scans. One is the list of bullish reversals, and the other is the list of bearish reversals. Very impressive results.
We’re happy to announce the launch of our newest app, Daily Stocks Pro for the iPad. Daily Stocks Pro is a new advanced stock analysis tool that filters the entire stock market and identifies those stocks showing the greatest potential for profit in real-time.
- Real-Time Scanning: Daily Stocks Pro scans the market in real-time, the original Daily Stocks only scanned the market at the end of the day. There is lots of potential profit to be made from these scans during trading hours.
- More Stocks: Daily Stocks Pro scans all US stocks, whereas the original Daily Stocks scanned only the S&P500. That’s 15x more stocks.
- New Scans: Daily Stocks Pro has a new Reversals trading model in addition to the existing stock scans and japenese candlesticks, again all of these scan in real-time.
- Fibonacci Retracement Lines: The real-time charts in Daily Stocks Pro include automatically drawn fibonacci retracement lines. These are drawn in real-time and an indicator will appear in your stock lists when one is present.
- Volume and Price Filters: The stock lists in Daily Stocks Pro can be a bit daunting at times. In order to help you find the stocks that fit your criteria we’ve added Volume and Price filters.
- New Real-Time Chart Intervals: Daily Stocks Pro has new chart intervals. Intraday (3, 5, 15, 30 and 60 min), daily, weekly and monthly time-frames.
In addition to these great new features Daily Stocks Pro also gives our users access to the following:
- Watchlist: A place that contains easy to find signals for the stocks that you follow. It is synced with your other missingSTEP apps and devices and gives you the ability to track an unlimited number of stocks.
- Stock Specific Pages: Live coverage of stock news from trusted sources, financial highlights, and key ratios.
- Market Pulse: This section includes our popular market direction forecast, futures and market indices, market momentum inficators, and live coverage of market news.
It’s been over three years since we released the original Daily Stocks for the iPad. It truly is an amazing app and we have been very diligent about adding features and updates to Daily Stocks in those three years, a major one being unlimited access to real-time charts. At the time, a first for a mobile app.
We strive to be the leader in our industry and we want to keep bringing exciting features and functionality to our users. In order to give our users the most profit potential we had to redesign Daily Stocks from the ground up and we’re very close to finalizing a new and improved version of the app called Daily Stocks Pro. We are very excited about this new app, the advanced features, and the potential profit for our users. In the coming days we will announce the features and release date of the new and exciting Daily Stocks Pro for the iPad.