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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Trader X who wrote (11391)	2/6/2001 10:58:27 AM
From: Michael Watkins	Read Replies (1) \| Respond to of 12039

TraderX, First, its a mistake to demand any candle pattern be 100% perfectly formed. For example, I've taken many a successful short trade based on an 'imperfect' dark cloud cover. What is important is if the market forces that create a pattern are roughly equivalent. Hammers open with a gap down, and never close the gap during the trading day. Secondly, I believe your assertion is incorrect. A hammer does have to be isolated from the previous range by a gap. The two examples I provided would certainly be viewed as hammers by most people watching such things - small real body contained within the upper half/third of the candle, with a tail, the longer the better. The market dynamics that cause it to be drawn indicate a significant decline during the bar followed by a significant rally. A white hammer would be viewed as even more positive, as it means the rally was able to overcome and hold the day's open. Having said all this, in a down trend hammers are meant to be broken. But perhaps not this time, or perhaps not for a period of time. EDIT: I use candlesticks sparingly lest I neglect a full featured diet of tools. Seriously, I could continue on with bars only; I do find they add some context here and there but the common patterns are just that - common, and easily spotted, and frequently these days they have less meaning. But I'll take a good dark cloud cover any day ;)