When the market opens lower than preceding day’s candle, buyers come into the stock but not with enough power to close above the prior day’s close. This scenario gives penny stock chartist a signal that a possible rally may be forthcoming. The Inverted Hammer signals the possibility that a change of trend may be in the cards. Of course confirmation can not be confirmed until the open of the third day with an open above the Inverted Hammer. Penny stock trade looking for a sign that a downward trend may be nearing completion should look for the Inverted hammer.
Dark Cloud Cover
Penny traders should be on the lookout for this chart pattern and consider taking money off the table and banking profits when this formation appears on a penny stock chart. When a penny stock is in a uptrend and possibly losing steam, the stock gaps open above the previous day’s candlestick but eventually peters out and falls below the previous candlestick’s midpoint. Confirmation can only be confirmed after the market open the following day and The Dark Cloud Cover pattern, a bearish formation, should be considered a strong indicator that the upward trend is over.
Any penny stock trader is all too familiar with this formation… the Three Black Crows. We’ve all seen these nasty birds more times than we care to admit and unfortunately, it is all too common on penny stock charts but that is the game we play as penny stock traders. Usually occurring at the end of an uptrend, this formation shows that severe selling is likely to continue as we often see with penny stocks, crushing all hope of a reversal anytime soon. Promoters or insider selling is usually the culprit when we see this formation on a penny stock chart.
All three of these formations are powerful indicators when they show up on penny stock charts. Anyone considering investing or trading penny stocks would do well to educate themselves in technical analysis with candlestick charting. There are some people that feel that charts have no place when trying to predict future movement of penny stocks and believe that the entire penny stock market is controlled my promoters, financiers and market makers. We disagree here at 1000 Penny Stocks and believe that candlestick charts are the number one indicator to use for technical analysis when trading penny stocks.
Here is another article related to stock charts.
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