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"Wait and See" Candlestick Patterns
Certain signals give the trader an indication of a weak market or period of consolidation, these patterns are referred to as wait and see patterns. Avoiding these situations can help traders avoid unnecessary exposure until a clear trend has formed.
Komas or spinning top
This pattern refers to the idea that "the trend is not quite sure where to go". In this pattern the price did not move much and therefore shows a period of indecision/consolidation. Buyer and seller activity was equally matched throughout the trading day and neither the buyers or sellers have established a trend.
The harami is a two day candle pattern. The first day of the pattern consists of a long bodied candle either black or white. On the second day a short opposite candle is formed. This generates a "wait and see" signal since it appears that the market is focused on the first large day, and on the second is waiting for more information. This is also seen since there should be lower trading volume on the second day.
This pattern is often mistaken for an engulfing pattern but it is important to note the order of the candles.
Haramiyose candlestick
This two day pattern is similar to the harami, except it indicates a reverse in trend. The first day opens with a tall candle of either color, the second day a doji candlestick appears. The doji in this case opens at a different price from the previous day's close.
The reasoning to wait when this signal occurs is that the market is unsure of where to go. The third candle will help us confirm.
The hoshi pattern has the same candlesticks as the Harami pattern, except that the second candle gaps up.
Waiting after this pattern is prudent since there should be a short correction to help fill the gap.
Shooting Star
In the case of a shooting star, it is identical to the hoshi except it has a long upper shadow. It also signifies a "wait and see" situation.
Waiting after this pattern is prudent since there should be a short correction to help fill the gap.
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