Page 141 - THE MARKET WHISPERER

THE MARKET WHISPERER 13 9

is 50 cents. Observing this candle relative to adjacent candles, we have no
doubt that in that five-minute timeframe, sellers strongly controlled the
stock. The very fact that after five minutes of seller control a balance was

reached between sellers and buyers, as expressed by the narrow range
candle [1], indicates that the battle for control is peaking and could shift
to the opposite group. In this case, we can see immediately following the

narrow range candle that the buyers did take over. Very often, a narrow
range candle does indicate a change of direction, known as “price
reversal.”

What is the stock’s trend?
From the chart above, we cannot see sufficient candles to ascertain
the trend. But let us assume for now that since the start of trading, AAPL
is trending up. Because, statistically speaking, the chances of the trend’s

continuing upward movement are stronger than the chances of it changing,
the narrow range candle [1] has a strong chance of being followed by an

uptrend and control would return to buyers, which is what did happen.

The formation of changing direction comprised of a wide range
downward candle [2] followed by a narrow range candle [1] and then
another rising candle is called “reversal,” which we will learn more about

later.

SMART We never make trading decisions based on only one
MONEY candle. Every candle is significant and reliable only within a
formation comprised of several candles around it.

Candle Tail

The tail, also known as the shadow, indicates a change in the power

balance between buyers and sellers. To understand how the tail is formed,

let’s look at the chart below, showing a day of AAPL intraday behavior.