Getting Started with Technical Analysis | 7-2-24

Hello, everyone, and welcome to Schwab Coaching. My name is Cameron May. I' m a senior manager here at Schwab, and this is Getting Started with Technical Analysis. And today, I thought we' d take it right back to basics. What is it on a stock chart that may signal that today is the day to buy a stock? Today, we' re going to be talking about how to read and trade candlestick patterns on a stock chart. And with the markets pushing right up to, boy, the S &P is set for possibly a record close. I thought maybe we' d talk about five bullish candlestick patterns. So it should be a really good discussion. I' m, of course, looking forward to it.

But before we can get to that, let me first of all say hello to everybody that' s joining us here in the live stream on YouTube. Great to see you. Hello there, Joe and Sandeep, Sharif, Scott, Ra, Ambrose, Naresh, CheeseGolfing, Doug, everybody else. Thanks for joining us week after week. We really do appreciate your attendance and your contributions here. We also want to say thank you to our sponsors. I want to say welcome to anybody that might be here for the very first time. Great to have you on board. And if you' re watching on the YouTube archive after the fact, enjoy the presentation. But be aware that you You are reinvited to join us in the live stream. It kicks off promptly at 2 o' clock Eastern Standard Time on Tuesday afternoons.

Now, as a final heads up, my very good friend, Barb Armstrong is going to be hanging out in the chats with us. She' s going to be addressing any questions that are at least on topic, but that I can' t get to just during the flow of the presentation. Barb' s there to pick up the slack for me. So thanks for being there, Barb. And we' ll see you next time. And Barb and I would like to issue an invitation to all of you, if you' re not following us on X, please do that. It s a great resource, best place to connect with us in between these live streams. So at BarbArmstrongCS is where you can find Barb. You can find me there at CameronMayCS. Give us a follow.

It doesn' t cost anything, but it also just connects you to the additional education that' s available through that platform. All right. But let' s get into it. And as we do, we want to consider the risks associated with investing. So these disclosures are important. Bear this information in mind. The information here is for general informational purposes only, should not be considered an individualized recommendation or personalized investment advice. Investing involves risks, including the loss of principle. Schwab does not recommend the use of technical analysis as a sole means of investment research. And any investment decision you make in your self-directed account is solely your responsibility. Okay. So with that said, let' s set an agenda for the day, how we want things to proceed.

First thing I want to do, I said I' m stripping it back to you. I want to make sure that everyone in my audience, live or otherwise, can follow along with what we' re looking at on the chart. So first thing that we' re going to do is talk about the basic construction of a candlestick on a stock chart. What does it tell the trader? Then we' re going to move on to five example bullish candlestick patterns that may signal to some that use this sort of an approach to trading or investing that today, today is the day for entry. They can be used for very precise, now precision does not guarantee performance, of course. So, but we' re going to talk about how those candles might be identified, what the labels of these five different candlestick patterns are.

And then we' re going to look at some examples on the Thinkorswim desktop software. Okay. That' s going to be the plan. So let' s get right to Thinkorswim and let' So start off with basic candlestick construction. So what I have here is a one- month daily chart on Thinkorswim desktop. If you haven' t been there yet, you can go to thinkorswim. com. If you haven' t downloaded this, you can download it free of charge. Just from your Schwab online account, you go to Trade and you' ll see a link in the far right column that says Thinkorswim. Okay. So, but this is the Thinkorswim desktop. We' ve logged in just with our Schwab username and password. And this one- month daily candlestick chart is just going to give us a closer view of the construction here.

Now, really, the foundation of candlesticks predates or precedes the construction of a candlestick. And this is sort of the candlestick concept. And it begins with what we call a bar chart. So I' m going to switch things up here a little bit. I' m going to make a couple of changes to my chart settings. So I' m going to go up here to the little gear icon. Pardon me. I' ll get to the settings in just a moment. Change the style of chart first. Let' s click on the ' style' tab. And I' m going to go down to where it says chart type' and switch this to ' bar'. And that' s going to give us these lines, vertical lines to horizontal lines, representing individuals.

And this is going to give us a little bit of a sense in the individual days of trading. But they' re a little bit thin to my taste as a presenter. I know that I don' t want, I don' t like my audience to have to squint. So now let' s go to our chart settings and I' m going to change the appearance of those bars for just a moment. Right now, they' re just set to a width of one out of five. Let' s dial that up to maybe a three out of five. You can see what that' s going to do to the appearance on the chart. Just make it easier for everybody to see. Alright. So what are these bars? Well, we have, well, we have, well, we have a few bars.

So I' ll first say each one of these bars is a, it represents one completed day of trading or one day of trading. And it gives us four bits of information about that day' s trading. So let' s talk about the first couple of bits represented by the vertical line of each bar. So the vertical line here represents the range of trading prices for the day. So if we take this green bar right up here at the top, it' s range of trading span from a low down here 513 . 90 up to a high up here of 522 . 8 I can actually see those values by looking at the H and the L right there. High and low, as I pointed that bar. So that' s what the vertical line represents.

The horizontal lines. The ones sticking out to the left for each bar represents the opening price for that day. So this had an opening price of 514. 25 down here. If we move into the vertical line, rallied up to this peak during trading, 522. 88. And then what do you suppose the line sticking out to the right represents? Yeah, it' s the closing price. So that' s 519. 56 in this case. And again, I can see those values by looking at the O for open and the C for close right there. But four bits of information, just at a glance for traders, they can see how trading went, high, low, open, close, all in that one little bar symbol on the chart. Now, one other thing is the color scheme here.

Color just tells us if it' s green, that the open was higher than the close. And we can see that here. The red means that the open was lower than the close. And you can see here, we opened here and closed down here. So that' s your traditional bar chart. Okay? Well, for some traders, they like a little bit slightly different visual representation of trading activity. And what they do, what the system does automatically for them is it just draws a box capturing the open and the close range. Okay? So keep an eye on maybe this red box. Okay? This red bar. So as I come up here, let' s switch our style now. And we re gonna go back to, our chart type. Let' s change it from a bar to a candle.

And what you' ll see, as a matter of fact, it might even be easier for you to keep an eye on this green because my menu obscured your ability to see that. So let' s go up here to style. Let' s go to candle back to bar. Look at this one right here. And what you' ll see is a box that just appears from open to close. Switch our style from bar to candle. There we go. Yep. It' s the same information just presented slightly differently. Visually. Okay? We' re still seeing in this, in all cases, the vertical length represents the range of prices for the day from high to low. But we also see the open to close presented as a box.

But in this case, when we draw a box, we don' t know which one was sticking out the left and which one was sticking out to the right. We just have a box. So the color becomes vital. So in the case of candles, we need to look at the color. We need to look at the color of the boxes. On Thinkorswim with these default settings, a white box means that our close was higher than our open. Kind of makes sense. A white or a green box indicating maybe intraday bullishness. A red box means that our close was below our open. So for example, on this red candle day, we can just see at a glance. Okay. So our high was up here. Our low is down here.

And because it' s red, we must have opened at the top of the box and closed down at the bottom of the box. So the story, quote unquote, the story of that day might be opened up here. Things are looking comparatively bullish compared to where we were the day before. Down a little bit, rallied higher, and then sagged all the way down here to this low and really closed pretty close to those session lows. So as a trader, how might one be feeling about the current market? What' s the momentum? Just with that glance, they might say, well, yeah, based on how things are going at that moment, things were bearish for Meta Platforms. Okay. So that is your introduction to not only candlestick charts, but we got a bonus - Got to learn about bar charts as well.

Well, for some traders, there are different configurations of these candles that may hold additional significance above others. Now, doesn' t mean that they' re gonna turn out to be more significant. That they' re always gonna be more predictive than let' s say, quote unquote, normal candles. But I did want to talk about five bullish candle patterns that some traders use to identify entry signals on a chart. Okay. And so, I wanted to start out with possibly the most common one. For those of you who use candles, or at least familiar with candles, what do you think is possibly the most common candle pattern to show up on a stock chart? They pop up all the time. They pop up all over the place. You want to take a second to guess which one?

It' s okay if you' re wrong, that' s alright. I don' t even have the data to back up. This is just an observation based on a couple of decades. It' s actually closing on a three decades now. I' ve been an educator for about 20 years. And before that, I was in different positions on Wall Street, stretching out now to, this is my 27th year, almost ready to enter my 28th. But possibly, the most common candle pattern that carries a label, a specific label, is a hammer pattern. Okay. So let' s go to, how about we look at alphabet for a moment, and let' s get acquainted with some of these patterns. I' m going to zoom this out, this chart, let' s switch this from the one- month chart.

Let' s change that to a three- month chart. Click okay. And what I want to draw your attention to here is this candle right here. Now, with this candle, and so I can see it. If candle patterns, they are not typically traded, this is maybe takeaway number one, not typically traded in isolation from other technical evidence on a chart. A common approach to candlestick pattern trading is, number one, to look at the trend of the stock, number two, to look for apparent price floors and price ceilings, and then look to see if the candles are giving us some signal. The point here being, if a stock has been behaving bullishly, conceptually, let' s say it' s been going up, well, just because it' s going up doesn' t mean it' s always a good time to buy.

Buying at a peak, even an uptrend, if stock goes down, maybe we' re able to ride it out, but for a while at least, the timing might not feel great. So even in an uptrend, the trader might wait for price to come down to what they think appears to be a price floor. So for example, Alphabet moving higher before we run into this candle, also recently it has pulled down. And a trader might make a case that there' s a possible price floor, maybe ramping up through here, something like that. So they may have a suspicion, might be getting around time to enter, right? But what about the day-to-day behavior leading up to us getting down to this price floor? Well, we had a big red candle day on May 30th.

So a trader may be looking for a reversal of sales. So a trader may be looking for a reversal of sales. Each of these patterns that I' m going to be talking about today have some real psychological logic, some psychological underpinnings to why some traders might imbue some special significance in them, okay? So let' s talk about that hammer pattern. So here we have a stock that' s been going up, recently pulling back. We' re looking to see if the momentum can shift. So now that we know how this candle is constructed, we know its story. And so let' s talk through the story. We' re pulling back. We' re pulling down. During the day, well, we open up here. In this case, and maybe if I zoom in, it' ll give us a little bit closer view of that candle.

There it is right there. This candle opened right here. During the day, sold off. So at that time, what' s the sentiment? Probably in keeping with the bearish sentiment that had been sort of prevailing over the last couple of weeks. Not so good. But before we even accomplish the close of trading, there' s a rally up from these lows. We get all the way above the previous day' s high. I' m not, pardon me, not above the previous day' s high, above the opening price and close above that open. So within a single day, a possibly significant shift in investor sentiment. And to some traders, that might be just what they' re looking for as confirmation that, hey, we have an upward trend where prices have been falling, but maybe that momentum is starting to go back in the direction of the established trend.

And for some, that may be actionable enough to take an entry. For others though, quite commonly with a hammer, they may wait for the next day and look for another close above the close for that hammer. Okay. Joe says, dumb question. How do you make the green candle solid green? It' s not a dumb question, Joe. Actually, a lot of people prefer it that way. It' s always a preference thing, but that' s one of the chart settings. You can just click on a chart settings, change the chart. Change the appearance of your candles and fill that candle just like that. I' m not going to, but that' s how it' s done. Okay. So that is your hammer candle.

Now for each of these, let me lay out some sort of, I always hesitate to use the word universal because it means that that can imply that it always applies. And there, if there' s one thing about technicians, it' s that there is almost, you know, no consensus on anything. But what we' re talking about today are five bullish patterns that that do require some bullish behavior on the chart first. Okay. So, looking at trend and support and resistance, pretty commonly used as pre- qualifiers. That' s going to apply to all five of the things that we discuss. Number two is there' s going to be some psychological underpinnings, logic to each of these. Okay. Number three is that even though I' m using a daily chart conceptually, these different patterns might be used on other timeframes.

You know, there might be technical traders right now looking for hammers on a weekly chart, or there might be technical traders looking for hammers on an hourly chart and so on. Now, the final point I want to make there, though, is the trader wants to resist the temptation probably to overstate the significance of a candle. All right. Looking at our hammer right now, this is a one- day event. Does the fact that we have a bullish hammer or bullish whatever we' re talking about at a single day or maybe maybe two days, maybe three days of candlestick patterns, does that mean that the stock is about to go charging up for months and years? Probably not. That might be the trader overselling something to themselves on a daily candle chart.

Typically, the interpretation here is that that single day' s worth of activity, might mean that we Re moving off a support level and moving up toward the next possible resistance level, that might be a few days away, it might be a couple of weeks away. Beyond that, the expected influence of this candle is anticipated to either be fading or to have faded. Does that make sense? Okay. Tom says, what' s the difference in this hammer and the one about June 12th? Let me see what you' re talking about, Tom, because that' s a good question. Okay. All right. There' s one right there. Now a couple of things that stand out to me as differences. Number one is that this hammer happened pretty close to a recent peak and typically we' re looking for these to appear at recent lows.

So that' s one thing. Okay. Um, actually that' s sort of, you know, in considering things, there' s actually an element here of this candle that might be considered by some to be a stronger example of a hammer. And that is this candle has very little wick or shadow sticking out the top of the pattern. And if you think about it' s obviously called a hammer for a reason, right? It looks like a hammer. If you were to draw a very crude hammer rectangle with a with a line representing the handle, that' s the hammer pattern. Well, just like with a with a real hammer, you don' t want a bunch of wood sticking out the top. It makes it not work well.

And conceptually, um, traders don' t like to see much sticking out the top of the chart hammer either, because what that means is that we' re way above the day' s high, pardon me, way below the day' s high. And if the rally doesn' t even get us up close to the day' s high, is it really a convincing rally? Question mark? Yeah. So yeah, um, in construction, this might actually be a better- looking hammer in position. I think that there are traders who would make the case that this is in an inferior chart position. If that makes sense. This one' s closer to support; this one might say happening close to a resistance. Good question. All right. So there. s pattern number one. Let' s go learn about some other patterns patterns.

And by the way, if we want to, I suppose we could take a quick peek. I think meta. Ah, okay. Yeah, there was a hammer right here happening right near an apparent support level where prices had pulled down recently. A little bit. Maybe some would get to be stickler about how much is sticking out the top. There' s another one over here that, um, you know, it' s happening near an apparent level of support. It' s happening after a recent pullback in price. Somebody picked this one apart for me. Filu asked, does it matter whether it' s green or red? That A good question for some traders, they say yes. For others, they say no. I think that the, the stickler that the more demanding requirement would be that it' s a green candle with rather than a red candle.

Okay, so that' s a good question. This is a red candle, meaning that the close was in this case a little bit below the open. Another problem is that there' s not much of a head to it. Imagine if you were trying to swing a hammer that has a little thin head. It' s hard to hit the nail, right? Yeah. Traditional hammers have a little bit more of an obvious head to them. This one, some might, might be reluctant to call it a hammer, but that doesn' T, I' m going to throw in a bonus pattern here. What might they call that instead where it looks more like a traditional sort of a Christian cross? That' s actually known as a dragonfly doji.

It just looks a whole lot like a hammer with a really thin head, which again just means that the open and the close are almost identical. Still a bullish pattern though. Yep. Conceptually, just about exactly the same thing happened, and it can have just about exactly the same implications. So there' s a bonus. All right, let' s look at, let' s look at another closely related pattern. It' s known as an inverse hammer. Imagine in your minds what you think this might look like as we go to it. Let' s go to Apple. Here' s Apple. What' s the trend? It' s been going up. What has price done recently? It' s pulled down to a possible support level.

One thing that some traders don' t like, do is when there' s a strong move to the upside, they look for a pullback of about a third to about a half of that distance. It looks like we' re getting close to that right here. And then we have this behavior. Now this is, it' s like a hammer where the head of the hammer is instead of being up toward the top, it' s toward the bottom. And and so does that sound like sort of an intraday rally that kind of petered out a little bit? Yep. For some traders, they consider this to still be bullish, just not as bullish as a hammer. I wouldn' t be surprised if I were to twist the arms of 10 technical traders, there might be eight or nine of them.

I don' t know if this is just an example that say, if I got to choose between a hammer and inverse hammer, let' s go for the hammer. But the concept here is yes, there was a sell off intraday, but support held and we didn' t even go back down below the day' s close, pardon me, below the day' s open. So for some, they may look at that as an indication that we re about to bounce, but probably even more commonly traders might wait to see if we get a subsequent close that' s higher than that day' s close. All right. But I think you can call it, we can see why it' s called an inverse hammer. It just looks like we took that hammer and swung it upside down and planted it at support.

Otherwise all the pre qualifiers, the identification is the same uptrend at or near an apparent level of support. Not much in this case of a tail sticking out the bottom and then confirmation the next day. So there' s two patterns. Let' s look at a third pattern. This one is going to be different. It Going to look a lot different than these ones, but for some traders, I' ve heard this opinion expressed to me that doesn' t amount to evidence, right? That that' s not like definitive evidence that this is true. But some traders consider this to be the most bullish of the bullish candlestick patterns. And it' s known as a bullish engulfing pattern. I' m going to look at several examples of this one. Let' s look at Wells Fargo first.

Okay. So here' s WFC. Let' s look, let' s get rid of this old drawing. First of all, let me hold on a second. I don' t want to. No, I don' t think this has any application. Does it? No, Yeah. Let' s just, let' s just clear this drawing set. So we' re working with a clean chart. Okay. So the pattern itself is right here. So what is it? A bullish engulfing in this case? And maybe I don' t have enough of the chart on here. Let' s bring up a one- year chart. Okay, this will just to allow you to see, was this a bullish chart leading up to this candle? Well, Wells had had a pretty good run over eight months, more recently consolidating sideways.

Are sideways charts still conceptually tradable even for bulls? Yeah. Yeah. For some bulls, if they see a sideways chart, they' re just looking for maybe a move off of a price floor or a bounce off of support. So trend and support pre-qualifiers. So now let' s go back to that three- month chart. Just to get our closer look again. Price is pulling down and down and down. And the traders think they might be thinking to themselves, ' Ooh, we' re getting close to that support.' Is it time to buy yet? I don' t know. Prices are still falling from one day to the next. Let' s talk about the psychology of this bullish engulfing pattern.

So what an engulfing padding pattern means is that we' ve had a pull- down on a price chart with a little red, with a red candle down toward the bottom. It doesn' t always have to be red. This is where some people are not as nitpicky as others, but there' s a candle down toward the bottom with a big white candle, the body of which looks like it could just swallow up the body of the previous candle. It engulfs the body of that candle. So just to drive that point home, let me draw some lines over here. There' s our closing price on our white candle. Here' s our opening price on our white candle. And you can see the whole body of their previous candle just fits neatly inside that.

So that' s the, that' s the, the way we identify or re-read that candle. Why might it be psychologically significant? What is the logic there? Well, if price was going down and then with our white candle, we know that we opened, opened way down here. How' s it feeling as of that open? Well, that' s just more, more selling. But before the day' s over, we rally up all the way up here and close all the way above all the territory that was surrendered by the previous day. Right? It' s not only a rally from today' s lows today being this white candle in this case, but we' ve, we' ve exceeded the body of the previous day. So for some traders, they might, that might be significant confirmation, adequate confirmation to say today' s the day.

If it lines up with my trend and my support expectations, maybe this thing. About to swing back up toward resistance and X price ceiling. In this case, that' s, that appears to be what it' s doing. It' s never guaranteed to get up to where the trader think it' s going to go. But in this case, you know, with the benefit of hindsight, we can say that looks like it, it either has, or it' s likely to. All right. But this is one of those patterns where the trader does not typically wait until the next day. As I mentioned for some, they consider this to be the strongest. Now, even if they consider it to be the strongest, it' s not guaranteed to perform. Right?

But it's, it' Such a strong move in the, in, in the anticipated direction of the stock that just getting that close might be, might be a confirmation enough. Let' s see. Sandeep, one could select patterns, show their engulfing patterns on a chart. Sandeep, there is a pattern search tool up here. I' ll let people explore this on their own. You can, you can search for price patterns and for candlestick patterns. I will say in my experience, it' s just easier to do it manually using your eyes. It' s difficult for the computer to know exactly what you' re looking for. Okay. So there' s an example of a bullish engulfing. Let' s look at maybe a couple of others. Maybe BAC.

You can see here As a stock where it' s in this case, again, it' s another example of a sideways trending stock, maybe trading near support. Prices come down and then all of a sudden we have, alright, trading starts lower, not looking so strong in the morning, but by afternoon and the market close, prices rallied all the way above the entire body of the previous day, engulfing that previous day. And that may be a signal that price has some new momentum. And in this case, it looks like we' re breaking above even the ceiling. Now with, with engulfing patterns, they sort of have a unique interpretation for some traders. The more candles that are engulfed, the more significant the engulfing behavior. Here' s what I' m talking about.

Let me bring up a chart of PG. Procter & Gamble. Look back. I might have to widen my chart out again. Let' s, let' s change our timeframe to maybe a six month chart here. Okay. You can see the stock has pulled down recently. And in this case, we went down and we started chopping sideways. And then we get this huge white candle. So on April 19th, we opened at the lowest open since what? Since back here in January. So as of that morning, how do you think investors are feeling about PG? Probably not very good, but by the close, they may be feeling a lot better. Prices are well above the open high. And we' ve not only exceeded the width of the body of the previous day, but the one that, but the day before that, before that, before that, how many days?

One, two, three, four, five, six, seven, eight, nine, 10, 11. So this candle is kicking into gear, the stagnation of 11 days of trading. And so for some traders, they might, they may see that sort of behavior as particularly significant in this case. Once again, pretty good, good example of that panning out, although it doesn' t always behave just like that. All right. So there' s our bullish engulfing. So we' ve had hammer, inverse hammer, bullish engulfing. We have time for a couple of more. Let' s get it done. Next one is known as a Harami. Now this one Harami, not an English word. That' s actually a Japanese word. It was actually the Japanese markets that are, that were the origin of candlestick charts. Actually, well, predating by centuries, the actual appearance of electronic charts.

But let' s, let' s look at a Harami and talk about what it is. Okay. So here, let' s look at a Harami and talk about what it is. So what we' re looking at here is Nvidia. Yeah. Nvidia is how to look at, look at, I didn' I intend for this, but look where it' s gone. It' s this Harami. Anyway, stock had been running up and up and up and up and up. Then it started to chop, chop and it pulled back. And for some traders, they may be looking for where some evidence there. We' re getting the end of the pullback and with Harami, it' s actually just the opposite of a bullish engulfing. Usually a bullish engulfing is a little red candle. It' s a little red candle.

At the bottom of a down move, followed by a big white candle that could swallow it up. In this case, it' s a big red candle at the bottom of a down move, followed by a small white candle inside. Yeah. Scott, I Ve always had to take, maybe I need to get on, you know, translate this sometime. The word Harami, apparently in Japanese means pregnant. The concept here is that we have a large body candle with a small body candle, entirely, contained inside it. Large body or small body in a large body sounds like a pretty good description of pregnant. But in any case, what it means psychologically here is price has been coming down and down and down. We have this huge move to the downside, which just feels to the trader, maybe quite bearish.

And then the next day it' s like, well, maybe not so bearish. Now prices are starting to go up again. We even manage a little bit of a rally from open to close. And that might be a sign that we' ve found a support, found a reversal point. Now, in my experience, and in most of the books I' ve read on the topic, and most of the traders I' ve talked with about this, most of the classes I' ve taught about it, traders typically wait for confirmation the next day, just a closing price above, above the small bodied candles, a closing price. So if we zoom in here, maybe it' s a little bit easier to see.

There Our big red candle, lots of bears, some bullishness going into the close, reversal to some bullishness going into the close of the next day, and then confirmation right there. And so if we get this signal or any other candle signal, where might the trader be looking for? If this is the entry, where might they start to plan taking some profits? If the stock moves as anticipated, maybe up at the next area of resistance, wherever they see that to be. Okay. Sandeep is saying, is, should we go back to Nvidia or, or back to the full screen view and say, is today' s Nvidia candle considered to be Harami? No, because we need a big red candle. There' s no big red candle. We, the small white candle is there, but this one' s not red.

That Actually what would this might be considered to be. Hammer from yesterday did not consider to be Harami. It' s confirmed today. So for some traders, they might say, well, I' m going to wait, see if we can get a close above the close from the hammer day. Okay. So there' s our hammer, inverse hammer, bullish engulfing and Harami. One more, one more to learn. This one' s not terribly common, although this is interesting. I didn' t even notice this. There' s an example of it right after this Harami. Okay. What you' ll notice here on the chart is we pulled down. There' s another red line right here, a red bar, red candle. And look at this day. I m going to zoom back in here. Why not?

So we already had our Harami. I' m going to remove that for just a moment. When we have a down move that terminates in a big red day. Yeah. It just looks like more selling, but in the case, in this case here, we had a gap down overnight. We opened even lower, just looks like more selling. Oh, for the bulls on Nvidia, this much might feel like it' s just a recurring nightmare, but then the rally sets in and we race up from these, this new open, which is, which is all the way below the previous low. If that rally continues and goes through the midpoint of the red candle day, think about how, how much significance that might be. Wow. All that selling yesterday, most of it has been reversed in a single day with some buying.

If there' s a close above the midpoint here of the red candle, we call that a piercing line because we have a red candle. And then we pierced up through the midpoint of that with a, with a white candle. Okay. Pascal saying what indicators for swing trades? Well, these would be swing trades. Now that doesn' t mean that trend traders can' t use candlesticks. If they' re, you know, making an effort, hopefully to refine their entries, whether swing trading or trend trading, it' s never a guarantee that it Going to work out, right. But even for a trend trader, they may be trying to look down to an individual day. Let' s see if today' s the day to enter.

And so it' s quite common for trend traders to use candlestick patterns, but swing trading just means that when we' re getting in, we have a plan for when we' re going in. We think we' re going to take profits. So whether we got in on this Harami or we got in on this piercing line and a piercing line typically does not technically require a confirmation from the next day' s behavior. Maybe the trader' s looking for price to go up to the next price ceiling. Some might be a little bit more aggressive. Look at it up here. Something like that. Yeah. So this one' s called a piercing line again, Joe. Okay. It' s because we' re piercing the midline. Okay. It' s because of the red candle.

So the, another example of that would be like L I M where we had price coming down and down. And maybe this one, we need to see a little bit more on our timeframe. I' ll just take it out to a one year view. You can see here. We had the stock struggling to get above about four 15, struggling for months, finally pops up and through. It pulls back down to that level as a possible previous price ceiling. Could that be a new price floor? Look at what happened here. We had selling, selling, selling, selling, selling gap down more selling on May 2nd. Let me zoom in on this. Now that we know where this line is coming from May 2nd, we sold from this open down to that close.

Oh, just looks terrible. Opened up the next day, even lower. Oh, just again, that recurring nightmare for the bulls. But then the rally is on. And we go up beyond the midpoint. We pierce the midpoint of the red line piercing line. There' s the signal that we might be at that support. This white candle toward the end of the day might be the time when the traders start to take the trade. And if you' re asking, if you' Re wondering, well, so camera, does this mean that the trader should be taking the trade? Like close to the close of the bullish candle or close to the open of the next day? Some traders wait for the next day. Others just try to get in toward the close. That' s personal preference.

Hey, there we go. One more. We have time. Here' s another possible piercing line. Where do we see a piercing line here? Right there. This one seemed to play out. Oh, this is interesting. Let' s look at some of these other patterns. What do we have right here? As we' re, as we rallied up sharply, is this, I don' t even think this is the symbol I intended. It' s not. It' s not. I must' ve written the wrong symbol. It' s interesting though, that we got down this low, but it' s not the symbol I intended. Okay. Skip that. Anyway, there we go. Let' s go see what the S &P is doing to close out the session. Looks like we' re still in record territory for a record close today.

It' s not the all time high the SPX has ever accomplished, but if we finish up today where we are, could be another good day for the bullish candle traders. All right, everybody we' ve accomplished what I set out to do today. When I kicked things off, I wanted to go through how candles are constructed, just the basic elements - high, low, open, close. Then I wanted to talk through five bullish candle patterns that a trader might, might, might use for the planning of a bullish trade. And we talked through the elements, the pre-qualifiers, how to identify those, those patterns and where a trader might plan to maybe exit - these are not typically long-term patterns; they' re typically a couple, a few days to a few weeks getting out, maybe at the next, the next resistance level, if that' s the trader' s typical approach.

KC says, are these patterns supported by some kind of statistical study? Extremely difficult to do KC because different timeframes, different charts, different market conditions, always changing. Any data that was, that would be released right now would be outdated at the moment of release. So that' s, that' s a difficulty. Obviously when we' re introduced to a new concept and don' t ever take anything that I teach as an endorsement or a promotion of a specific approach, but when a trader is learning a new concept, technically go to the paper money account, see if you can trade it. See if I, if identifying some of these bullish patterns seems to lead to moves. And if not, see if we can plan for when we might exit those trades.

If the pattern reverses, and we start to break back down below those, those candles, maybe it' s time to close it up. Okay, Kevin, you' re welcome. SJS Photography. You' re welcome. KC. Thanks for asking the question, everybody. Thanks for joining me today. As you go, just remember there are some other educational resources available to you. Don' t, they don' t cost you anything, but one of those is to find us on X. This is the best place. To connect with me or with Barb in between these live streams. You can follow Barb on X at Barb Armstrong, CS. You can also follow, follow me on X at Cameron May; and this is where I ll come when I don' t have a webcast going on, but I wanted to post something about the markets, ask a question, provide or, or even sort of spur some learning.

So yeah, follow us on X. That' s a great resource, but also subscribe to our trader talks channel. You can do that. Just go down below the display window right now, click on subscribe or click on the little button down the lower right -hand corner. But YouTube is where we house our playlists of previous webcasts, organized into series and topics. So great place to find what' s, what' s intriguing and important to you and watch those just at the time. That' s convenient to do. You can also join the live streams here as well. And subscribing also helps our channel. And one other thing that certainly helps is to click that like button. So we have 128 people watching. And I can see right now that 35 of you have already clicked that like button.

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