Looking at the end of the second upward rally, I see a Doji. A Doji is the worse thing I want to see once an upward trend begins or after a long upward trend as it signals that traders are now confused or undecided about the upward direction; should the market continue higher or should the market turn back down? The answer comes in the next candle when price closes below the low of the Doji, this is called a "Low Close Doji" or LCD. A "Low Close Doji" removed the indecision and makes a decision the market is ready to move lower.
The Low Close Doji and the next two candles confirm the downward trend has started. A downward trend is identified by a "Series" of lower highs and lower lows. These three candles meet that definition of a downward trend. I also see that the "Close" of each candle is below the "Close" of the previous candle, telling me the market is satisfied with moving the market lower step by step.
The last red candle is of particular interest to me. This previous candle's real body is taller than the last three candles. This tells me the sellers are getting more excited about moving this market lower, and because this candle closed at or very close to its low tells me sellers have taken full control of this market. As such, I now expect this market to continue to move lower in the days and weeks ahead.
Now that I have analyzed this market from the top down, it is time to start looking for trade opportunities, for this, I turn to the daily time frame.
The Low Close Doji and the next two candles confirm the downward trend has started. A downward trend is identified by a "Series" of lower highs and lower lows. These three candles meet that definition of a downward trend. I also see that the "Close" of each candle is below the "Close" of the previous candle, telling me the market is satisfied with moving the market lower step by step.
The last red candle is of particular interest to me. This previous candle's real body is taller than the last three candles. This tells me the sellers are getting more excited about moving this market lower, and because this candle closed at or very close to its low tells me sellers have taken full control of this market. As such, I now expect this market to continue to move lower in the days and weeks ahead.
Now that I have analyzed this market from the top down, it is time to start looking for trade opportunities, for this, I turn to the daily time frame.
