Trading Hammers (revisited)

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Quote from NihabaAshi:

Hi jimmyrey,

Thanks for the chart.

The Hammer Lines in this thread have the following qualities...

* Body (difference between Close and Open) is greater in length than the Upper Shadow

* Lower shadow is greater than the combination of the Body and Upper Shadow

* I tolerate an Upper Shadow (it's ok to have one).

Thus, your chart has an invalid Bullish Dark Hammer pattern via this discussion due to the fact the Upper Shadow > Body.

However, lets pretend it was valid.

The one particular contingency plan I've discussed in this thread is to reverse at the appearance of a Dark WRB only when the Dark WRB has a close within the range of long lower shadow (same is true for the Bullish White Hammer pattern).

The Dark WRB in your chart has a close outside (below) the range of the long lower shadow.

Thus, a signal to reverse the Long into a Short would not have occurred.

Therefore, had this been a valid Bullish Dark Hammer pattern the trade result would have been a losing trade position via the initial stop/loss protection being hit.

Something else, whenver you see a Long Lower Shadow that you immediately begin investigating as a possible pattern signal...

Always change the interval to a smaller interval because there may be a valid pattern signal on the smaller chart interval that allows for a better entry price.

Out of curiousity, is there another trading instrument with similar like price action as the Sterling Futures.

Also, the price action has a nice looking price drop from the left of the chart to the right of the chart.

Do you know what was theheadline news of the UK to cause a price drop like that???

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

Following up on the questions you raise above..

"Out of curiousity, is there another trading instrument with similar like price action as the Sterling Futures. "

......... there is a fairly good correlation between 6b & 6e on a long term basis (days+) though this cannot always relied upon on an short term (intraday) basis. In this particular case on 2nd March c.08.45 there was no confirmation of the Dark Hammer Line by the Euro. There may be other instruments with £ like price action but, if there are, I don't follow them.


"Do you know what was theheadline news of the UK to cause a price drop like that???"

There were several news releases on the 1st March (the day before) which probably contributed to the decline. Weaker than expected £ based Retail Sales data on morning (GMT) of 1st and stronger than expected US Personal Spending & strong ISM Manufacturing data on 1st (PM). The decline accelerated on 2nd March shortly after the release of the £ UK Construction pmi data.

"Always change the interval to a smaller interval because there may be a valid pattern signal on the smaller chart interval that allows for a better entry price. ".......

I have attached a chart of a lower timeframe 6b 10minute, which shows a Dark Candle Line. Though I don't believe this is a valid Bullish Dark Hammer pattern because the Body of C1 does not engulf body of C3 (checking?).

I have a question on the candle highlighted with the 2nd arrow. Do you consider this a WRB (assuming its body is greater than the longest body of the three prior intervals)?

Thanks
JAR
 

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Hello Mark,

Thank you for all your hard work on this thread.

Can you please comment on this red hammer?

Would it be safe to say that when the lower shadow hits the lower bollinger band it gives it more strength to hit the higher bollinger band?


(Sorry for the small size, I am still learning to post)

 
Quote from jimmyrey:

...I have a question on the candle highlighted with the 2nd arrow. Do you consider this a WRB (assuming its body is greater than the longest body of the three prior intervals)?

http://www.elitetrader.com/vb/attachment.php?s=&postid=1386678

Thanks
JAR
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Hi JAR,

Thanks for answering my questions.

To answer your question...

Yes that's a WRB in which the body is longer than each of the prior three bodies.

It's also intersting to see the WRB closed within the range of a prior Dark Hammer Line (your first arrow annotation) after declining volatility.

Thus, the WRB signaled a volatility spike after declining volatility.

Therefore, this particular WRB is contains more info about changes in supply/demand in comparison to other WRB's.

The above comments is beyond this thread but I just wanted to throw it out there for those that are using a volatility based method or wanting something new to research to merit integrating into their existing methodology.

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

Hello Mark,

Thank you for all your hard work on this thread.

Can you please comment on this red hammer?

Would it be safe to say that when the lower shadow hits the lower bollinger band it gives it more strength to hit the higher bollinger band?

(Sorry for the small size, I am still learning to post)
More...

Hi,

Thanks for the Forex EurUsd chart.

I don't use Bollinger Bands nor other traditional indicators even though I used them many years ago prior to traversing into price action only trading.

However, that is a valid Bullish Dark Hammer pattern.

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

Mark,

Can you please comment on why this is an invalid hammer?

Thank you.
More...

The reason that is invalid via the discussion in this thread is because the White Hammer Line occurs after three consecutive dark lines that had lower closes.

Had the White Hammer Line Close > Open of the most recent prior Dark Line...

It would have been a valid pattern signal.

All the above info has been mentioned in great detailed several times through out this thread.

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

Here is a chart I posted on my blog on feb 22 of several hammer candlesticks. I was quite bearish on the markets based on this, and I entered several short positions (puts) that worked out well in the next several days into last week's carnage. Always pays to "pay attention" to those hammers!!

http://lauristonletter.blogspot.com/
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Hi Lauriston,

I'm a reader of your blog for many months now.

Thanks for the good commentary.

Yeah, I do remember your comments on that day and I also remember someone replied that the market would not sell off even though no info was provided by the poster about why he/she was bullish.

Anyways, I've learn a long time ago that Hammers provide a wealth of info about shifts in supply/demand, changes in volatility, support/resistance zones et cetera.

By the way, have you taken a look at the 15min chart for the NYA.X for February 20th.

Look at the price action of the White Shooting Star involved with the Dark WRB that occurred three intervals after the White Shooting Star.

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

First , allow me to compliment you for unselfishly sharing your time & knowledge. I thought I knew a little about candlesticks, but after reading most of this thread I realize that I know little.

On the chart I posted there is a DIH at the yellow arrow. I believe it meets all the requirements except for the high of the DIH and the high of the White WRB are the same.

My question is:

Would you pass this trade up or try to enter after seeing the Dark WRB form?

Thank you...

T.M.
 
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