Tuesday, January 19, 2016

Looking for Hairy Bottoms ..01.19.16

Years ago I coined the phrases hairy tops and hairy bottoms to describe candlestick patterns that often accompany trend reversals. The "hair" on a hairy bottom is really the extension tail on the candlestick body and indicates that the close is above the low...the extent of which can be judged by the length of the hair.
While it may be a bit early to bet the farm on the hairy bottom pattern currently setting up it is well worth keeping track of its development as this has proven to be one of the most reliable  multiple candle signals.
The screen shot attached is from 40 minutes in on today's market. These are daily bars.
Hairy tops and bottoms are fractal...meaning you can detect them on multiple time frames and day traders of my acquaintance routinely use them on 2 minute bars to gauge waning momentum.