Crude Oil futures now have another large tail on the Daily chart, but this time it is signalling downside price rejection with a lower shadow/wick. In Japanese Candlestick Analysis it is similar to the Bullish Reversal Pattern known as a "Hammer" Candlestick. There are two important things to note here that make this less than significant: 1. There is very little volume in this Candlestick; and 2. This is not coming at the lows of a trend. Therefore this is not a Hammer it is a "Paper Umbrella".
One other thing to note is "Candlestick Math" which takes multiple candlesticks and combines them to form one Candlestick. Six 5 min candles make up the 30 min candle, two 30 min candles make up the Hourly candle, etc. In this case starting with the opening of the "Shooting Star" on 8/28, and the close today on the "Paper Umbrella" would form a giant "Spinning Top" four Day candlestick in Japanese Candlestick Analysis.
This is also a potential reversal signal coming at the highs on a 52 week chart. What the spinning top shows is massive indecision and confusion among market participants, and doubts or lack of conviction for continuation for the Bulls can setup long liquidation which fuels a change in trend. This is ultimately the theory behind Japanese Candlestick Analysis and it has to do with Psychology. Identifying a pattern in Japanese Candlestick Analysis is not as important as understanding what is taking place under the hood. Doubts, confusion, conviction, etc. are what fuel reversals and/or continuation patterns and that is what the focus with Japanese Candlestick Analysis and these types of patterns should be all about.
Lastly, the trendline support on the Daily chart is now significant and a key reference area to trade from whether the bias is in going long or short.
Patterns on the smaller degree timeframes such as the 30 min chart that coincide with the larger degree pattern or phase of development are ultimately what I am looking for in regards to favorable trade locations that offer the largest reward for the risk taken.
(Click on chart to expand)
I have a previous post on Crude Oil, and this is a follow up to it. The link for that previous post is here: http://scottpluschau.blogspot.com/2013/08/crude-oil-futures-are-developing-very.html
Join me on Linked In/ Twitter/ or Stocktwits @ ScottPluschau