How Strong Trade Setups Impact the Price Movement

Last week, I published an article on a strong candlestick pattern formed on IBM stock price chart: Piercing Line Pattern: A Strong Candlestick Buy Signal

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The candlestick pattern was formed on the monthly time-frame. So it can take such a long time for this market to follow what this candlestick signal says. I explained in that article that the IBM market can change the direction and start an uptrend, while it has been going down for several years since 2013.

Before you read the rest of this article, please note that this is NOT a trading or investment advice. You understand that you invest/buy/sell/hold at your own risk.

The next monthly candlestick has opened with a gap-down, which is normal on the stock market. But now it is going up and is forming a lower shadow. This means it is following the strong piercing line pattern that was formed right before the currently forming monthly candlestick:

IBM's Stock Price

While you do know that a monthly candlestick takes one month to mature and close, and you should only judge and analyze a candlestick after it is closed, you can refer to a shorter time-frame like weekly, and check whether that time-frame is following the monthly time-frame signal or not. Let’s do it:

IBM's Stock Price

As you can see, the last closed weekly candlestick has closed with a long lower shadow, and, Bollinger Middle Band has worked as a strong resistance on this market, and so it has made the price go down.

Based on what the lower shadow of the last closed weekly candlestick says, most probably this market is going to go up again to test Bollinger Middle Band as a resistance. If the current week’s weekly candlestick closes with a bullish body, and, if it closes above Bollinger middle band, it is a strong indication that most probably this market will follow the long trade setup that is formed on the monthly time-frame, and and it can go up.

This is how you can follow up with the formed trade setups to wait for the best time to enter the markets.

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