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To the average trader, candlestick patterns are a bunch of crosses and odd shapes with bizarre names, like the three black crows, or the abandoned baby bottom.
But as odd as they may sound, they can provide powerful insight into direction.
Early October 2018 was quite painful for the average investor.
The major indices fell out of the sky. The tech-heavy NASDAQ fell from 8,100 to 7,300. The S&P 500 dropped from 2,925 to 2,725.
If you pull a rubber band too far, too fast, what happens?
It snaps back, right? The same thing happens with stocks, indexes, and currencies. If they’re pulled too far in one direction, eventually they’ll snap back and revert to back to the mean. In fact, we see it happen all the time.
Markets are a fickle beast.
Even with the U.S. and China nearing a trade deal, markets began to pull back in March 2019.
While many shifted blame to the President for the move lower, we had to consider that markets were technically stretched. We were overdue for a pullback.