Bar SpikeTechnical Analysis
A bar spike occurs when the price has an incredibly high range between the bar’s highest and lowest point. The interpretation of these bars is based almost completely on the closing point, and the bars which follow afterwards. If the previous trend is an uptrend, an upward bar spike with a close to the top and further bars thereafter confirm the uptrend. A bar spike downward with a close to the bottom indicate a potential reversal. A series of bars trending lower thereafter can be a potential confirmation.
In a downtrend, the opposite occurs. A bar spike with a close towards the bottom (followed by further downwards bars) indicates a potential downtrend continuation. A bar spike with a close towards the top (followed by further upward bars) indicates a potential reversal.
When a spike occurs it shouldn’t be ignored, since it can indicate a reversal. This requires an examination of news reports or the asset’s underlying fundamentals. Trader opinion of the asset usually changes for a distinct reason when the asset creates a spike bar in a reverse direction. One can occasionally decipher the cause of the change simply by the news immediately prior to the spike.
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