Trading Hammers (revisited)

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We got those hammer candlesticks on the major equity indexes today. This is just one-day candle and not a cluster as we had before Feb 26th plunge, but I think the bounce is over and we are due for another correction or significant pullback. I do think oil stocks and other commodity stocks need to cooperate, but I will be ready to plunge into short positions (via puts), as soon as the move starts. e.g. look at SPY QQQQ XLE or $INDU $SPX etc charts. Very clear hammer at top of recent rally = exhaustion to me :)

http://lauristonletter.blogspot.com/
 
Quote from lauriston:

We got those hammer candlesticks on the major equity indexes today. This is just one-day candle and not a cluster as we had before Feb 26th plunge, but I think the bounce is over and we are due for another correction or significant pullback. I do think oil stocks and other commodity stocks need to cooperate, but I will be ready to plunge into short positions (via puts), as soon as the move starts. e.g. look at SPY QQQQ XLE or $INDU $SPX etc charts. Very clear hammer at top of recent rally = exhaustion to me :)
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Hi Lauriston,

Can you please post the direct link to your Hammer pattern discussion instead of just posting a link to your blog.

This prevents trying to search and not find the information.

Simply, instead of posting a general link to your blog...

Please post a direct link to your Hammer pattern discussion or attach some charts here at ET to your message post to prevent me from seeing you posting in a way just to promote you Blog.

More importantly, it will prevent me from thinking your really not participating via posting info that can't be researched.

Thus, when you request someone to look at something...at least state what chart interval they should be looking at, what type of Hammer pattern it is and some basic rules about your Hammer pattern.

Therefore, this thread is about Hammer patterns and not about the lauristonletter.

PM also sent to you.

Mark
 
In cases like today's sudden upsurge on the prices of CL and the quick drop back down which created a reverse hammer / gravestone doji type formation, do you regard that as a legitimate signal or do you scratch that off because of the "false rumor" involved.

As a pure technical trader, i would like to think this is a shortable rally, not that I will short since it's too volatile right now for my type of trading.

any thoughts?
 
Quote from polpolik:

In cases like today's sudden upsurge on the prices of CL and the quick drop back down which created a reverse hammer / gravestone doji type formation, do you regard that as a legitimate signal or do you scratch that off because of the "false rumor" involved.

As a pure technical trader, i would like to think this is a shortable rally, not that I will short since it's too volatile right now for my type of trading.

any thoughts?
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Hi polpolik,

I can't answer that until you post a chart example or name the chart interval and the time of the price pattern you saw.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Mark, thanks for the reply. While this example probably isn't 100% what I'm talking about, my question came from a "what if" scenario.

anyways, as a sample of what happened afterhours, when crude spiked and then came back down.

I'm trying to determine if i should even consider these "freakish" events when reading candlesticks.

Attached is the QM, 2 days, 15 minutes candlestick charts from IB.

Thanks!
 

Attachments

Sensei;

Is this a valid Bullish White Hammer Pattern via the sub-groups you are discussing?

Couple things:

* The upper shadow is equal to the white body, HOWEVER, the Lower Shadow is at least 3x's as large as the body plus the upper shadow.

* Large Dark WRB signals to be on guard for pattern signal that may soon follow.
 

Attachments

Quote from polpolik:

In cases like today's sudden upsurge on the prices of CL and the quick drop back down which created a reverse hammer / gravestone doji type formation, do you regard that as a legitimate signal or do you scratch that off because of the "false rumor" involved.

http://www.elitetrader.com/vb/attachment.php?s=&postid=1414503

As a pure technical trader, i would like to think this is a shortable rally, not that I will short since it's too volatile right now for my type of trading.

any thoughts?
More...

Hi polpolik,

Thanks for the chart.

In the beginning which any new strategy, new to trading or new to a particular trading instrument...

We should always stick to our pattern signals that's in our trading plan to confirm what you understand about the price action.

Simply, if I understood the price action and determine that the bearish reversal pattern signal in CL would have caused a loss...

I would have ignored the pattern signal and stayed on the sidelines looking for a pattern signal to confirm a Long entry.

However, had I was bearish and understood the price action with the key market event that caused the spike...

I would have taken the trade only if a valid Bearish pattern signal appeared.

Now, all the above is for someone that's using a new strategy, new to trading or new to a particular trading instrument.

The reality is as the years go by, better understanding of the markets develop along with being consistently profitable...

We tend to do a little more intuition trading (trades not exactly by the trading plan).

You can take trades like that via shorting that type of volatility spike but only if it isn't counter-trend trading.

Thus, the price spike to the upside isn't within a uptrending price action.

Another option as you hinted via saying that price action like that is too volatile for you to trade...

Stay on the sidelines and use that type of volatility spike as a key s/r zone.

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

Sensei;

Is this a valid Bullish White Hammer Pattern via the sub-groups you are discussing?

Couple things:

* The upper shadow is equal to the white body, HOWEVER, the Lower Shadow is at least 3x's as large as the body plus the upper shadow.

* Large Dark WRB signals to be on guard for pattern signal that may soon follow.
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HI KPCURRENCY,

Once I start seeing someone ask me a few times if a pattern has passed the rules discussed in this thread...

I need to ask a question.

Have you written down the rules that has been discussed for the Bullish White Hammer pattern?

If so and your looking at your check list of the rules...

You should be able to answer that question yourself if this is a valid Bullish White Hammer pattern via the rules I've discussed for this particular pattern.

With that said, its a little difficult for me to see the following on your chart.

Therefore, I can't answer your question until you have answered the following questions:

* Is the body of the White Hammer line > than the length of the Upper Shadow on the White Hammer line ?

* Among the three intervals before the Dark WRB...is the Long Lower Shadow of the White Hammer Line > Length of the body in each of those three intervals ?

There's no subjectivity involved with the rules.

Thus, if one rule isn't met...you know its not one of the patterns I'm discussing in this thread.

Simply, you've already know what I'm going to say via something you said about the body and the upper shadown.

By the way, thanks for the chart.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Learnered one;

two things:

1. First I believe I read somewhere that an adjustment was made as to the size of the body in relation to the upper shadow when the lower shadow was greater than or equal to 3xs the body and the upper shadow. Is this not the case?

2. With all due respect. I am trying to learn rules of your sub-groups and they have not all been given.

If I post charts that meet the rules, then I would not need the rules laid out. If I post charts that do not meet the rules but try to show I am looking at the PRICE ACTION, am I not doing what you would want to see prior to giving out the rules?

Simply, how does exhibiting knowledge of all the rules give you incentive to provide the rules?
 
Quote from KPCURRENCY:

Learnered one;

two things:

1. First I believe I read somewhere that an adjustment was made as to the size of the body in relation to the upper shadow when the lower shadow was greater than or equal to 3xs the body and the upper shadow. Is this not the case?

2. With all due respect. I am trying to learn rules of your sub-groups and they have not all been given.

If I post charts that meet the rules, then I would not need the rules laid out. If I post charts that do not meet the rules but try to show I am looking at the PRICE ACTION, am I not doing what you would want to see prior to giving out the rules?

Simply, how does exhibiting knowledge of all the rules give you incentive to provide the rules?
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Hi KPCURRENCY,

I've sent you a private message to explain the importance why you should concentrate on the rules you do have access to in this thread.

Message to those reading this thread...

Don't get the 3x length aspect of the Long Lower shadow mixed up between the Bullish White Hammer pattern and the Bullish Dark Hammer pattern.

Bullish Dark Hammer pattern

11-29-06 12:18am (2nd post at the below link)

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=144

Bullish White Hammer pattern

03-23-06 05:25am (1st post at the below link)

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=91

Simply, the Dark Hammer Line has a Body > Upper Shadow.

However, its ok for the Body = Upper Shadow if the Long Lower Shadow is 3x > Body + Upper Shadow

This does not apply to the White Hammer Line because the Body must always be > Upper Shadow for this discussion in this thread.

----------------------

Are there valid Bullish White Hammer pattern sub-groups that have Body < or = Upper Shadow???

Yes but I'm not discussing any of those particular sub-groups in this thread because they are a completely different and involved in a completely different price action.

Therefore, don't worry about the rules that have yet to be discussed.

Instead, concentrate on understanding the price action and the rules that have been disclosed and then exhibit that knowledge in your own chart examples.

Only then will I have incentive to provide more info to better understand the price action involving Hammer patterns and the remaining rules.

Last of all, don't forget, this thread is just about my use of Hammers.

It's about your own unique Hammer patterns.

Thus, when your discussing your own stuff in this thread.

Provide chart examples, state some rules for better understanding of the price action and tell an occasional story that produced the Hammer pattern for a particular trading day.

The above paragraph is what prompted my commentary (several message posts ago) to lauriston because such was not being done.

Simply, I'm here to learn too and to encourage others to cough up something useful involving Hammer patterns...

I needed to step forward myself as I've done in this thread.

P.S. Read the thread and make a check list of the rules that have been stated.

Use that checklist to determine on your own if it meets the rules I've disclosed so far.

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