1. Beware of 'a long K line exhausting momentum'
When the market has consecutive 10 or more K lines in the same direction, followed by a sudden appearance of a very long trend K line, it often indicates a depletion of momentum. After that, at least 10 K lines of pullback may occur, or even a trend reversal.
2. Pay attention to the 'final rush' after a gap in the moving average
When the price gaps and moves far away from the moving average, it is usually a signal of strength at the end of a trend, and a larger level of adjustment is likely to follow.
3. Overlapping K lines form a more reliable reversal signal
If a reversal candlestick nearly completely overlaps with the previous one, it can be seen as a 'double K reversal' structure, which is a signal worth noting for entry.
4. Beware of reversals in the first hour of opening
The market often reverses within the first hour of trading, so it is recommended not to rush to chase highs or lows.
5. If you can't understand the market, it's better not to act
When indecisive, the best strategy is to wait and observe, act less and watch more.
6. Common characteristics of double bottom pullbacks
The pullback range of a double bottom pattern usually exceeds 50%, even close to the previous low. When the price gradually rises after testing the low, forming a rounded bottom, it shows weakening bearish momentum. If the price tests the bottom a second time without breaking the previous low, bearish strength diminishes, and the price begins to test upwards. If buying continues and selling pressure is limited, the market may start an upward trend.
7. Rebounds in a downtrend are often 'bear flags'
In a clear bearish trend, each rebound should first be seen as an opportunity to short, and it is not advisable to easily bottom fish.
1. The 'second signal' is more trustworthy
Regardless of entering or reversing, the signal that appears a second time is often more reliable than the first.
2. Bottom fishing requires waiting for a strong bullish candle confirmation
In a strong downtrend, only a strong bullish candle can be considered for bottom fishing. A doji represents insufficient buying pressure and cannot be used as a buying signal.
3. Avoid being eager to buy during the first rebound
In a downtrend, do not blindly buy during the first rebound. However, if a strong double K reversal occurs after a 'selling climax', it can be seen as a buying point.
Note: A climax-style decline is usually accompanied by two waves of pullbacks, lasting a relatively long time (for example, a 5-minute chart may exceed 1 hour).
4. Small bearish followed by large bearish, a signal for trend continuation
After a series of small bearish candles followed by a long bearish candle, it indicates that bearish strength is still strong, and the trend may continue.
5. 'Selling climax + double K reversal' is a classic buying point
After a panic sell-off in the market, if a strong double K reversal forms immediately afterward, consider entering a long position.
6. Extreme trends often require a second test
In a strong trend, the market often requires a second or even third 'climax' before it truly pulls back.
7. A pullback after a sharp decline does not necessarily return to the starting point
After a rapid decline, the price may pull back to near the starting point within 1-2 days. However, if the selling pressure is very heavy, the rebound may be limited—larger level trends may still dominate the market.
8. Attempt to short at the end of the rising channel
If a clear reversal (such as a double K reversal downward) occurs at the end of a strong rising channel, and there was a 'buying climax' beforehand, consider shorting.
9. Be cautious when shorting during a strong upward trend
In a strong upward trend, only an obvious large bearish candle can be considered for shorting, and it is not advisable to easily open a short position below a bullish candle.
10. A double K reversal needs to be judged in conjunction with the environment
The double K reversal signal is only effective when there is an expectation of a market reversal and should not be used in isolation.
11. Narrow range fluctuations have a 'magnetic effect'
A series of overlapping K lines forming a narrow range will create a 'magnetic effect' on prices, and most breakout attempts will fail.
Lower range: bears reluctant to sell, bulls buy, pushing the price back up;
Upper range: bears exert pressure, bulls wait, leading to price pullbacks.
But eventually, there will be an effective breakthrough, so patience is required for confirmation.
