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Candle Wick

Technical Analysis

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The candle wick runs from the top of the candlestick to the bottom. The tallest point represents the high, the bottom represents the low. The candle wick’s format delivers more information on the overall candlestick format. The wick is especially important if it is overtly long or incredibly short, or non-existent.

A shaved wick suggests a substantial amount of information based on its structure. It can be at the candlestick’s top or bottom, indicating one of four possibilities: the high equals the open, the high equals the close, the low equals the open, or the low equals the close. This is based on the combination of a shaved wick’s position and color.

Shaved Top

If the top is a shaved wick the day either opened at the high or closed at the high. When the candle is red or black, the candlestick opened at a high and closed at a lower price. This means no new buying occurred above the open, and the day was bearish. The close may be equal to the low, or alternatively, the low may be below the close, indicating a rebound towards the end of the trading period.

When the shaved top is green, or outlined with a white filling, the candlestick closed at the high of the trading period. The course of the day was bullish into the close. If the wick is below the open, then the price dipped after the open before ascending into the close.

Shaved Bottom

If the bottom is a shaved wick, the day either opened at the low or closed at the low. When the candle is red or black, the trading period closed at the low, indicating bearish sentiment took control into the close. If a wick appears above the top of the candle’s body, the price increased from the open before sinking.

If the candle is green or hollowed white, the trading period opened at the low and rose afterwards. It eventually closed higher. If a wick exists, the price peaked and fell lower for the close, but still above the open.

Shadows

A long wick (or shadow) indicates a different set of information about sentiment and the format the trading period’s volatility. Shadows only appear if prices exceeded the top of the body and then fell for the close, or fell below the bottom of the candlestick body and rose for the close. The length of the top wick and bottom wick should each be given careful attention.

Upper Shadow

Upper shadows appear when price is beyond the top of the body. The charted time period rose to a high after the open and fell lower. This happens regardless of color, and the only thing color tells you is the overall path of prices during the trading period.

If the candlestick is red or black, the time period closed lower than the open. The day opened at the top of the body, rose to the high of the shadow, then fell lower to the close. If a lower wick exists, it fell to a very low point then rallied into the close.

If the candlestick is green or hollow white on the inside, the day closed above the open. Since it opened at the bottom of the body, it rose to the top of the wick, then fell for the close. If the lower wick exists, prices fell at some point in the trading period before increasing.

The interpretation of the upper shadow shouldn’t exist in a vacuum. Look at the previous trend to complete your examination. If the previous trend is a downtrend, buyers were still willing to buy at those levels, but demand weakened and this allowed prices to fall. If previous trend is an uptrend, buyers failed to close at the high, which may suggest weakening.

Lower Shadow

The appearance of a lower shadow indicates prices fell below the bottom of the candlestick’s body. They rallied afterwards into the close. The path of prices change based on the color and can be interpreted differently depending if the previous trend is an uptrend or a downtrend.

When the candlestick is red or black, prices opened at a higher price, fell to the bottom of the lower shadow and rose to a close below the open. An upper wick indicates a rise to a high at some point after the open.

If the candlestick is green or white on the interior, Prices fell to the low at some point after the open before rallying above the open into the close. An upper wick indicates price peaked at a high before descending after the open.

In an uptrend, note that sellers were able to take control before the close but weren’t able to hold. The trend may continue, especially if the bar is green or hollow white. If the candle is red, this is a warning about weakening of the trend.

In a downtrend, sellers failed to close below the low. If the bar is green the trend may weaken, or may simply be a bounce in price. When the bar is red, prices failed to remain at the low of the day.

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