Taking this a step further, you have to also note how long the wicks are because this can be an indication of what the market is doing. The body represents the open and close, but the wicks indicate the full trading range for that given period. When you look at the range, you may also want to look at the volume levels compare the surrounding candles. With a large body and an influx of volume, this could indicate indecision in the market. Similarly, if the volume is lower, this could mean the market is uninterested in the product.
Be sure to understand the other similar patterns that are out there such as Doji, which can look similar to a short line candle, but mean something different. Some tools you can use this with include Bollinger Bands and Pivot Points. These can help you find markets that may be changing and allow you time to enter and exit a position.
Short line candles are a wonderful to be alerted to a shift in the market, but as with all patterns, they are not one hundred percent. Utilize fundamental analysis and other tools to formulate a solid opinion. Each person has different objectives and this may not be for you. Be sure to look at all of MacroAxis and find the right tool for your portfolio management.
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Nathan Young is a Senior Member of Macroaxis Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States.
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