Long White at a Low Price Level

A single candle by itself is rarely sufficient reason to forecast an immediate
reversal. It could, however, be one clue that the prior trend may
be changing. For instance, as shown in Exhibit 2.5, a long white real
body at a low price range may be the first sign of a market bottom. A
long white candle shows that the ability to rise is virtually unimpeded
by the bears. The closer the close is to the high of the session, and the
longer the white real body, the more important the candle line.

Exhibit 2.6 shows that in late \991., this stock was stabilizing near $5.
The first sign that the bulls were attempting to take control was the
unusually long white real body at 1. Note how this real body was extended
compared to the prior real bodies. However, an almost equally
long, but black real body (for information on black real bodies, see page
29), on the week after candle L showed that the bears still had enough
force to offset the bulls' advance. In early \992, another unusually long
white candle, shown at2, appeared. This white candle opened on its low
(since it does not have a lower shadow) and closed on its high (since it
does not have an upper shadow). Such a candle is exceptionally strong,
notably when it is so elongated as in candle 2. Candle 3 was another
strong white candle that propelled prices to new multi-month highs. With
the tall white candles L and 2 both appearing near $5, we can see the
significanceo f that $5 support area. Consequently,w hen prices corrected
back to this level in fuly and August 1992, it is not surprising that the
selloff stopped near $5.