Wicks point to the direction price is headed. This contradicts common knowledge that the wick indicates failure.
What to look for: Trend reversal on higher volume.
1) HIGH VOLUME bounce
2) HIGHER VOLUME wick breaks through former support/resistance level
3) Look at the LARGER TIME FRAME for support/resistance levels. Are we there yet? If not, then wait.
Explanation: The reversal on higher volume (1) can be more than just a bounce. Subsequent candles with wicks that drive through previous resistance levels and (2), continue in the direction of the reversal, indicate that the resistance level has been wick breaking through and that the price can easily go there, provided volume stays high.
Long Strategy: After a long wick, enter on pullback when sellers have become exhausted. Use a fixed range volume profile and depth of market chart to find key demand level. Enter near that level, perhaps just above it, going against the much shorter term trend.
What to look for: Trend reversal on higher volume.
1) HIGH VOLUME bounce
2) HIGHER VOLUME wick breaks through former support/resistance level
3) Look at the LARGER TIME FRAME for support/resistance levels. Are we there yet? If not, then wait.
Explanation: The reversal on higher volume (1) can be more than just a bounce. Subsequent candles with wicks that drive through previous resistance levels and (2), continue in the direction of the reversal, indicate that the resistance level has been wick breaking through and that the price can easily go there, provided volume stays high.
Long Strategy: After a long wick, enter on pullback when sellers have become exhausted. Use a fixed range volume profile and depth of market chart to find key demand level. Enter near that level, perhaps just above it, going against the much shorter term trend.