Finally some USD Shorts to look forward to

Weekly candlestick forms a nice hanging man . What makes this an interesting candlestick pattern is the way it gapped up before closing lower.

Secondly, the price level of 94.76 is an unfilled down gap from 22/09/2003.

The US Dollar             has enjoyed a rally for quite some months, to the point that USD long position has become a boring proposition. So we're looking for a change of trend.

Best course of action is to wait for this week's candlestick to close bearish for confirmation or look for daily charts bearish candlestick pattern for an earlier confirmation.
That is my chart on the topic ! :)

A bearish candlestick pattern that forms at the end of an uptrend. It is created when there is a significant sell-off near the market open, but buyers are able to push this stock back up so that it closes at or near the opening price. Generally the large sell-off is seen as an early indication that the bulls (buyers) are losing control and demand for the asset is waning. "
sigmadict sigmadict
This formation does not mean that the bulls have definitively lost control, but it may be an early sign that the momentum is decreasing and the direction of the asset may be getting ready to change. The reliability of this signal is drastically improved when the price of the asset decreases the day after the signal. Hanging man formations can be more easily identified in intraday charts than daily charts and are a very popular formation used by day traders.

If this pattern is found at the end of a downtrend, it is known as a "hammer".
I believe that the hanging man is the most misunderstood candlestick of all. Whenever I see a hanging man, I am bullish. That's my personal interpretation.
+1 Reply
justatrader vlad.adrian
Agree that candlestick patterns on its own isn't a good trade signal, but when they appear near key levels, that's when they manifest themselves. Although its always best to move one TF lower and short on a bearish pattern (pref. DCC or bearish engulfing)

Here's a NASDAQ monthly hanging man. At least it made me a good bit of money in January. HM at a key resistance level.
jangseohee vlad.adrian
Hi Vlad teacher,
i am not disagreeing that Hanging Man is bullish. Perhaps a transient bullishness
I observed that FTSE 100 index have double Hanging Man that "hung" the index to major correction or collapse
+1 Reply
justatrader jangseohee
I think its easy to see why Vlad thinks hanging man is bullish. If you look at the chart I posted, on 12/8/2014 there was a bearish engulfing which turned back to a bullish continuation. As with candlestick patterns, I have repeated many times here and will do so once again. Taken in isolation, candlestick patterns give a 50 - 50 chance. Combine it with support/resistance and trend lines, and that's where they really shine. But again, its not that simple to just short on a hanging man at a resistance level for example. One needs to go a TF lower in order to see what's happening. So the above chart should be used as a guide for shorting USD based off Daily charts bearish candlestick pattern (which shows confluence with the weekly's bearish hanging man).
+1 Reply
vlad.adrian justatrader
I agree with that but I think you are misunderstanding my point. I am not saying that candlesticks are useless when taken by themselves, or that they are strong when taken into consideration with another bunch of facts (although that is how I use them too, but I am sure there are other ways to use them). My point is about the hanging man and that's it. In the textbook it says that the hanging man represents a fall in price and then a rally made by inexperienced traders/investors that saw a decline and decided to jump on the ship. That's the short definition in my own words. There are a few problems with that:
1 - from what I've seen until now, inexperienced traders buy breakouts, and whenever a decline occurs, they think it is the end of the trend. They do not tend to jump on corrections (if they would, they would make money in the markets, most certainly). This is a personal opinion.
2 - secondly, if you go in the depth of the candle, it means that at a certain point in time (this is a weekly chart, I will use it as an example), lets say on Tuesday, people were bearish on the dollar, but then by the end of the week, the bearishness vanished and professionals closed the week near the open. This is absorption. The selling pressure has been absorbed, short positions have been taken out due to the rally at the end of the week, weak longs have been shaken out by the fall at the beginning of the week. Something being bearish for some time and then at the end of the week turning bullish... that is not bearish to me.

Of course this doesn't happen all the time, and I wouldn't use a monthly chart as a starting point for a study. The month is too long, many things can happen. I for one, use the monthly chart only to look where price stands in comparison with the past years. I do not use any technical analysis on it (looking at a chart is technical analysis and all that nonsense that someone would say just to prove how wrong I am.... you got my point).
There is a concept very unfamiliar to so many people, and that is absorption. I recommend to read David Weis' book, which is a modern adaptation to the Wyckoff method. Wyckoff was the first to introduce the concept of absorption. The first sign of absorption is the hanging man candlestick.

Now you guys provided some chart examples. The problem with that is that both of you look at the top for hanging man candlesticks. I encourage you to scroll back a bit, and highlight all the hanging man candlesticks on the chart, that means the ones that didn't play out by the book should be in there too. Also jangseohee, you should study the difference between a hanging man and a hammer, because you got them wrong. Some candles you highlighted took place after bearish candles, and although it can't be called a downtrend, a candle like that after a bearish candle is more of a hammer rather than a hanging man. However, no matter how you call it, it is bullish.
+1 Reply
vlad.adrian vlad.adrian
An example of how bearish hanging man candlesticks are! I bought mostly all of the ones on USDSEK (charts are posted)
+1 Reply
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