medium · Volume Price Analysis
An equity swing trader is analyzing a daily chart and spots a 'Hanging Man' candle at the end of a markup phase. The next candle is a 'Shooting Star' at the same price level, and both show 1.8× average volume.
What is the trade plan?
- Enter long because the 'Hanging Man' candle's lower wick proves buyers are still aggressively supporting the stock.
- Do nothing, since a 'Hanging Man' pattern only becomes valid if it is followed by a confirmed bullish engulfing candle.
- Wait for a confirmed 'Test of Supply' to verify that the stock is still capable of moving higher after this minor bout of volatility.
- Exit long positions or enter short, as these two candles provide 'double signal' confirmation of institutional distribution.
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