Why did the price not go lower?

[clarkeharry]

Hi,
I want to know why did the price not go lower after the second long green candle. Just look at the first long green candle which is on a huge volume. However on the second green candle the volume is too less. I expected there were only a few buyers and the prices would correct themselves if not fall. Suppose one shorted the stock but the prices went from 435 to 495. Going just by price and volume why
did this happen?
Please see the attached pic.
Stock : Bharat Forge
Trading on NSE

 

[Pat494]

Technicals only sometimes work. Quite erratic.
Many say they are next to useless.

 

[EnlightenedJoe]

It didn't go down because the price is going up.

 

[Brumby]

Hi,
I want to know why did the price not go lower after the second long green candle. Just look at the first long green candle which is on a huge volume. However on the second green candle the volume is too less. I expected there were only a few buyers and the prices would correct themselves if not fall. Suppose one shorted the stock but the prices went from 435 to 495. Going just by price and volume why
did this happen?
Please see the attached pic.
Stock : Bharat Forge
Trading on NSE

There are obvious differences between the two WRB. The first is a green candle. Prices basically open at the low and traded up and closed near the high on high volume. Typically this is a sign of real demand. The second candle while green, has an initial gap down and traded down briefly and thereafter rallying to close near the high but on much smaller volume. I would suspect the second candle reacted on some kind of news. I think the retail end views it as bearish news but the institution end probably sees it differently. It is basically a trap and what the trade would called it as an amateur gap play.

 

[tomorton]

Don't depend on volume. In fact don't depend on any single indicator.

The best indication of where price will go is what price has just been doing. Price was rising up to your second marked candle, and the low of even this large range bar didn't breach the low further back in the uptrend. Lay a 20EMA and a 50EMA over this chart and I bet you will find price at the close of this candle is above the 20, the 20 is above the 50, and the 50 is rising, all useful clues that an uptrend is in place.

I don't have a clue why price did not fall, but you were shorting against an uptrend so its the wrong question anyway.

 

[clarkeharry]

Technicals only sometimes work. Quite erratic.
Many say they are next to useless.

Yeah Pat, technical analysis works at times only. Thats why we should have a stoploss. For me patience is the most important virtue in markets.

 

[clarkeharry]

It didn't go down because the price is going up.

Accepted. But the prices should have corrected before going up. I expected the prices to go down to the middle of the candle before going up.

 

[clarkeharry]

There are obvious differences between the two WRB. The first is a green candle. Prices basically open at the low and traded up and closed near the high on high volume. Typically this is a sign of real demand. The second candle while green, has an initial gap down and traded down briefly and thereafter rallying to close near the high but on much smaller volume. I would suspect the second candle reacted on some kind of news. I think the retail end views it as bearish news but the institution end probably sees it differently. It is basically a trap and what the trade would called it as an amateur gap play.

Yeah, the first candle is a sign of real demand. But the second is not. Thats why the prices should go down a bit. But they never retrace, never correct on so low volume but continues upwards.

 

[EnlightenedJoe]

Accepted. But the prices should have corrected before going up. I expected the prices to go down to the middle of the candle before going up.

Did your shop tell you that ? I wouldn't believe anything they say.

Maybe you need to talk to barjon. I heard he has some experience with big candles and knows how they work.

 

[Brumby]

Yeah, the first candle is a sign of real demand. But the second is not. Thats why the prices should go down a bit. But they never retrace, never correct on so low volume but continues upwards.

Each price action bar tells a story. Our job as trader is to interpret price action and understand what is going on with demand and supply. We know that the second bar gapped down after many days of corrective down days. There are usually two ways to interpret a WRB following a series of down days. It is either a continuation bar or an exhaustion bar. The fact that it initially gapped down suggest that there were willing sellers eager to get out. The fact that there was little follow through following the initial gap would suggest that aside from the initial sellers there were no other willing sellers who shared the same view. As such there was exhaustion of sellers. In trading stocks, the universal view is that when a stock stops going down is because it has run out of willing sellers. When you have a major gap down with no follow through, professional players see it as a buy opportunity. Since the initial sellers were gone from the initial gap down volume, it doesn't require a lot of volume to get the stock back up.

 

[brewski1984]

You sound like you're surprised, like you were certain it would go down a bit?

 

[dbphoenix]

Each price action bar tells a story. Our job as trader is to interpret price action and understand what is going on with demand and supply. We know that the second bar gapped down after many days of corrective down days. There are usually two ways to interpret a WRB following a series of down days. It is either a continuation bar or an exhaustion bar. The fact that it initially gapped down suggest that there were willing sellers eager to get out. The fact that there was little follow through following the initial gap would suggest that aside from the initial sellers there were no other willing sellers who shared the same view. As such there was exhaustion of sellers. In trading stocks, the universal view is that when a stock stops going down is because it has run out of willing sellers. When you have a major gap down with no follow through, professional players see it as a buy opportunity. Since the initial sellers were gone from the initial gap down volume, it doesn't require a lot of volume to get the stock back up.

Brumby is correct, though the action has nothing to do with candles per se since candles are nothing more than a means of illustration. If you don't understand what he's saying, look at much smaller candles to see what's going on "inside" your long candles.

Yeah, the first candle is a sign of real demand. But the second is not. Thats why the prices should go down a bit. But they never retrace, never correct on so low volume but continues upwards.

Actually the second is just as much a sign of "real demand" as the first. "Real demand" is reflected in the fact that price rises. The volume illustrates the lack of selling pressure in the second instance, which is why buyers are able to move price with so little resistance, i.e., so little volume.

If you're interested in price and volume and relationship between each, see this post and as many following as interest you.

 

[kalott]

all i see is a tall green candle in an uptrend

why would anyone want to sell at that time?

 

[piphoe]

Hi,
I want to know why did the price not go lower after the second long green candle. Just look at the first long green candle which is on a huge volume. However on the second green candle the volume is too less. I expected there were only a few buyers and the prices would correct themselves if not fall. Suppose one shorted the stock but the prices went from 435 to 495. Going just by price and volume why
did this happen?
Please see the attached pic.
Stock : Bharat Forge
Trading on NSE

I still haven't figured how to use those VOL BARS at bottom of the chart. Those are useless for me, don't see ANY correlation at all :|