Reversal Candle Cluster at Major Intra-day Resistance 07/10/2010
Here we have a great example of being able to read and understand raw price charts. Usually the market tells you direction before it makes its move, and today was no exception. This is a 15M chart of the GBP/JPY. As you can see the price had moved up into an area of previous resistance, and then formed a cluster of nice reversal candlestick patterns (black circle). Reversal candles were the first clue but not enough to get in just yet. What I look for next is what I call a confirmation candle that closes below the reversal candles body. Another words the reversal candle shows there is indecision at that level, and the confirmation candle shows there is actually selling pressure at that level. Once the confirmation candle closes you can enter there or wait for a slight pullback before entering, which is usually the technique we use in our live forex trading room to get better entries and thus high risk/reward trade setups. On this trade we managed +60 pips. Once the market ran into previous major intra-day support we got out with a nice profit in hand.