A stock may leave a “Hint” where it wants to go.
A big green/white candle with higher volume is a “Hint” it wants to go up. In many cases, after a big candle, the stock may pullback for a few days, then all of sudden, it goes up again. If the pullbacks are low volume, and does not close below the big candle’s low. I still believe the stock wants to go up. If the stock close below the big candle’s low, it will then invalidate the “Hint”, stop loss may be triggered
Here is my favorite setup:
1. overall market direction is in up trend
2. the stock is in strong up trend
3. big green/white candle with higher volume (ideally in a good location of a diamond, such as breaking into upper diamond, etc.)
4. buy the stock and add on pullbacks (go long the stocks or sell put vertical spreads)
5. stop loss is just below the low of the big white candle on a close basis
Some examples:
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