Hi Chris,You seem to have focussed on the fact that the one...

Hi Chris,


You seem to have focussed on the fact that the one example I indicated had a small down month prior to it.

In his book, Encyclopedia of Chart Patterns, Bulkowski discusses the criteria he used for the failure rate of the hang-man as a reversal candle; i.e., it resulted in a continuation pattern rather than a reversal pattern.

Criterion Three states:

"Occurs during a short-term (or longer) rising price trend." Page 257.

More than half of the hang man candles resulted in a continuation of the trend not the reversal of the trend.

It's performance as a reversal signal is poor.

Focussing on the hangman candle in a rising trend - the continuation rate was in fact 67%. That's getting considerably better than random. (Page 252.)

Now - having said all of that - sometimes it does act as a reversal signal - just not as often as some people think.

So we may well see a movement down from here - but I think we need to see that before putting a lot of credence on the single candle.

One of the things that we owe Bulkowski a great deal for, is the amount of empirical research he's done on all sorts of chart patterns.

Some of his research confirms conventional wisdom about certain chart patterns. In some cases, his research doesn't support the conventional wisdom.

Cheers
Redbacka