Trading Hammers (revisited)

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August 16th Wednesday 2006

CME EuroFX - EC

Bullish White Hammer Pattern
Sub-group: trend continuation signal
Chart Interval: 30min
PT Levels: not shown so you can figure them out on your own

I was on a long vacation and I'm slowly getting back into things.

EuroFX price movements have been sparked by key economic reports.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 

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Greetings Mark,

Thank you for another example. It would appear from those you have already published that the BWH must always overlap the previous price period; is this correct?

John G
 
Quote from jeg:

Greetings Mark,

Thank you for another example. It would appear from those you have already published that the BWH must always overlap the previous price period; is this correct?

John G
More...

Hi John,

I'm not sure what you mean by "overlap the previous price period".

Can you explain further?

Thanks.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Hi Mark,

If the high of the range [not the close] of the BWH does not overlap the range of the previous period [candle]. By range I mean the whole length including any price outside the body of the candle.

I hope this clarifies.

Thank you,

John G
 
Quote from jeg:

Hi Mark,

If the high of the range [not the close] of the BWH does not overlap the range of the previous period [candle]. By range I mean the whole length including any price outside the body of the candle.

I hope this clarifies.

Thank you,

John G
More...

Hi John,

Thanks for the clarification.

It's not a requirement for the range (price action between High and Low) of the White Hammer Line to overlap the range of the most recent prior interval (candlestick line).

However, as I mentioned many times in this thread, there are dozens of different types of Bullish White Hammer patterns and this thread is just about one of them.

Therefore, there is a particular type of Bullish White Hammer pattern (not discussed in this thread) that involves that particular type of range overlapping price action...

Its not a commonly seen pattern.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Quote from NihabaAshi:

August 16th Wednesday 2006

CME EuroFX - EC

Bullish White Hammer Pattern
Sub-group: trend continuation signal
Chart Interval: 30min
PT Levels: not shown so you can figure them out on your own

I was on a long vacation and I'm slowly getting back into things.

EuroFX price movements have been sparked by key economic reports.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
More...

Hi NihabaAshi,

You have often mentioned about getting "clues" about future price action from sister trading instruments and key economic reports. In your opinion, do you think that the dark hammer on 8/14 at 16:00 was a tip off to the ppi report and also the bullish white hammer a tip off to the cpi report?

Thanks rainman2
 

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Quote from rainman2:

Hi NihabaAshi,

You have often mentioned about getting "clues" about future price action from sister trading instruments and key economic reports. In your opinion, do you think that the dark hammer on 8/14 at 16:00 was a tip off to the ppi report and also the bullish white hammer a tip off to the cpi report?

http://www.elitetrader.com/vb/attachment.php?s=&postid=1174213

Thanks rainman2
More...

Hi rainman2,

Although its not a valid Dark Hammer pattern via this discussion...its price action is still very important in that it defines a key s/r zone via comparing the price action that occurred before the dark hammer line and the price action that occurred after the dark hammer line.

Therefore, whenever there's the appearance of a very long shadow like that...it doesn't matter if its a valid pattern signal or not...

It's still a key s/r zone that contains a wealth of information about shifts in supply/demand.

With that said...if your asking did these Hammer lines with the long shadows predict the direction of the price movement that occurred after the release of the key economic report...

My answer is NO.

Yet, they did predict that volatility was increasing to a level that if pattern signals do appear...

Those pattern signals has a higher odds of reaching either a WRB pt1 level or a price level where you can move your initial stop/loss protection into a profitable trailing stop that at least pays for the trade if it were to suddenly retrace against you.

That's what's really meant via the word clues.

Clues that pattern signals could appear very soon and now is not the time to be surfing the internet :D

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Anatomy of a hammer:

Here is a hammer on the hourly chart that showed up a couple of days ago on euro/sterling during the european open session.

Notice the 15 minute breakdown of such a hammer.

The trend was down and in the pre-open the bulls acted and this was blocked - more or less sideways action.

Now to the hammer: The bulls then went hard up 15 minutes - then the bears blocked it for 15. Then again hard up for another 15 minutes and finally a HARD down block (Dark cloud cover). At the end of these four bars - a hammer was evident on the hourly.

Classical 5 point elliott wave theory (3 impulse - 2 corrective waves leading to reversal), and the hammer was the final result before the reversal.
 

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Greetings Mark,

Another attempt to post a chart! It may not work &, therefore, I shall endeavour to describe it.

The market is S & P 500 cash & the chart is a five minute candle for the date 17th Nov. '06, and the times are GMT.
I estimate that EST is five hours later.

The BDH is at approximately 15.30 [10.30?] & it's low is approx. 1395: there is an earlier white bullish white bar around 14.40 [09.40] with a range 1396.3 to 1394.9 which I consider indicates demand which is confirmed by the BDH.

Does this qualify within the five hammers that you are covering in this forum?

Anticipatory thanks,

John G
 
Quote from jeg:

Greetings Mark,

Another attempt to post a chart! It may not work &, therefore, I shall endeavour to describe it.

The market is S & P 500 cash & the chart is a five minute candle for the date 17th Nov. '06, and the times are GMT.
I estimate that EST is five hours later.

The BDH is at approximately 15.30 [10.30?] & it's low is approx. 1395: there is an earlier white bullish white bar around 14.40 [09.40] with a range 1396.3 to 1394.9 which I consider indicates demand which is confirmed by the BDH.

Does this qualify within the five hammers that you are covering in this forum?

Anticipatory thanks,

John G
More...

I copy ET instructions for attachments...

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Use something like Snagit and they have a free trial but I think you can continue using the program after the free trial has expired but it will stamp their logo on it.

http://www.techsmith.com

There's free program called Xnview at http://www.xnview.com

I just checked my cash chart (SPX.X) and the Bullish Dark Hammer is almost valid on my chart...a few rules aren't valid.

Regardless, you said something that most don't do when using Japanese Candlestick patterns.

You identified and described the price action and what you saw on your chart in the BDH was as if you were using the BDH to confirm (confirmation tool) to something you already knew about the price action.

That's how Japanese Candlesticks should be used.

We should already understand and know what's occurring in the price action prior to the appearance of any candlestick pattern or any other pattern that has nothing to do with Japanese Candlesticks.

You will be improperly using Japanese Candlestick analysis via using it to tell you what's occurring in the price action.

Next step is for you to determine what was the cause of that earlier Bullish White interval that gave you early clues about demand (supply and demand analysis) that gave support to the development of the Bullish Dark Hammer pattern even though it wasn't a valid Dark Hammer.

Simply, you'll be trading the your understanding of the cause of the price action while using the Bullish Dark Hammer or any other pattern as a confirmation to what you know.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
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