As of 07/14/2020
  Indus: 26,643 +556.79 +2.1%  
  Trans: 9,465 +159.29 +1.7%  
  Utils: 800 +8.67 +1.1%  
  Nasdaq: 10,489 +97.74 +0.9%  
  S&P 500: 3,198 +42.30 +1.3%  
YTD
-6.6%  
-13.2%  
-9.0%  
 +16.9%  
-1.0%  
  Targets    Overview: 07/14/2020  
  Up arrow27,800 or 24,500 by 08/01/2020
  Up arrow10,050 or 8,600 by 08/01/2020
  Up arrow840 or 740 by 08/01/2020
  Up arrow10,800 or 10,000 by 08/01/2020
  Up arrow3,325 or 3,000 by 08/01/2020
CPI (updated daily): Arrows on 6/29/20
As of 07/14/2020
  Indus: 26,643 +556.79 +2.1%  
  Trans: 9,465 +159.29 +1.7%  
  Utils: 800 +8.67 +1.1%  
  Nasdaq: 10,489 +97.74 +0.9%  
  S&P 500: 3,198 +42.30 +1.3%  
YTD
-6.6%  
-13.2%  
-9.0%  
 +16.9%  
-1.0%  
  Targets    Overview: 07/14/2020  
  Up arrow27,800 or 24,500 by 08/01/2020
  Up arrow10,050 or 8,600 by 08/01/2020
  Up arrow840 or 740 by 08/01/2020
  Up arrow10,800 or 10,000 by 08/01/2020
  Up arrow3,325 or 3,000 by 08/01/2020
CPI (updated daily): Arrows on 6/29/20

Bulkowski on Tall Candle Support and Resistance

 

Tall Candle Support and Resistance: Summary

Unusually tall candles (2 times the average height) show support or resistance 39% of the time. Candles 4 times the average height do even better. However, price does not show a tendency to reverse near the middle of a tall body.

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-- Tom Bulkowski

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Tall Candle Methodology
Results
Conclusions
See Also

Tall Candle Support and Resistance: Methodology

Tall candle showing support

Test 1

I used 453 stocks of daily price data covering the 3 years ending May 28, 2007 in the first test and found 41,301 candles. Not all stocks covered the entire 3 years. Each of the candles had bodies (open to close, not high to low) more than twice as tall as the prior 22 trading day average (approximately 1 calendar month). I then searched for minor highs or minor lows that peaked or bottomed within the body of the candle.

For candles with upward breakouts, where price first closed above the top of the candle, I searched for minor lows and stopped the search if price closed below the bottom of the body. For downward breakouts, where price first closed below the bottom of the candle, I searched for minor highs and the search ended when price closed above the top of the body.

For example, in the figure, a candle with a tall body appears in mid March. Later, price forms a minor low that stops within the body of the tall candle. The tall black candle had an upward breakout (price first closed above the top of the candle) so I searched for a minor low.

Test 2

The second test was similar to the first except I required the candle bodies to be over four times the average height and also lengthened the search time to the 15 years ending on the same date. Few stocks covered the entire period. I found 25,285 candles that qualified.

Tall Candle Support and Resistance: Results

Top of page More

Test 1

Test 2

 

Tall Candle Support and Resistance: Conclusions

Based on this research, it is unclear whether tall candles actually show support or resistance. Think of it this way. Imagine that a candle was as tall as your price chart. In that case, every minor low or minor high would appear within the body of the candle. The success rate would be 100%. Thus, the taller the candle body the more likely it will be that minor highs or minor lows will find their way into the body of the candle and reverse there.

Also, the idea that a tall body commonly shows support in the middle of the candle is probably incorrect, at least based on these tests. Price is no more likely to stop near the middle of the body than anywhere else in the candle body.

-- Thomas Bulkowski

Top of page More

See Also

 

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