TechniTrader Beginner Stock Trading "Interpreting Sideways Candlestick Patterns"

Lists of Tips to Identify Sideways Patterns and Their Differences


Most traders do well during Uptrending Markets when there is either Moderately Trending action, Momentum runs, or Velocity runs. However the preponderance of Traders struggle during Sideways Trends. This is true whether the Trader is trading Stocks, Exchange Traded Funds, E-minis, or Options. There are hundreds of strategies that have been developed for sideways action, but still Technical and Retail Traders have meager gains or chronic losses during Sideways Market Conditions. The Retail Traders Market Participant Group includes those who have learned how to trade the Stock Market from home.

This is an important trend to master as the markets now trend sideways more than 60% of the time, often in patterns that are not recognized as sideways. 

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Here is a list of tips to help with identifying and interpreting Sideways Candlestick Patterns:

 1. Bottoming Formations are predominantly sideways.

 2. Topping Formations are also mostly sideways.

 3. Platform Market Conditions are lengthy sideways action in a tight formation that whipsaws Swing and Day Traders out of potentially good entries.

 4. Consolidations are common when Professional Traders are actively trading.

 5. Compression Patterns are frequently over looked by Traders.

 6. Trading Ranges are also sideways, but are often mistaken for Momentum runs.

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Here is a list of tips for interpreting Sideways Candlestick Patterns differences:

 1. Amplitude of Oscillation. All sideways action is a form of Oscillation

 2. Magnitude of individual candlestick size.

 3. Dimension of the typical time duration of the sideways pattern based on magnitude and amplitude.

 4. Typical location of that particular sideways pattern whether it forms in the short term, intermediate term, or long term trend.

 5. Trendline patterns that the sideways patterns create.

 6. They are the most reliable candlestick patterns for Day, Swing, or Position Trading entries.

 7. The type of Support or Resistance that sideways patterns create which defines the risk of the trade.

 8. The amount of acceleration, velocity, or the price action as that particular sideways pattern completes.

 9. The direction the stock will take as it breaks out of that particular sideways candlestick pattern.

 10. The indicators to use for that particular sideways action for optimal entries and exits and maximum profit gain potential. Stock Leading Indicators are excellent for confirmation of best entries.

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Below is a chart example in using a weekly view showing the type of analysis that all Traders need to be capable of doing within seconds of seeing a chart.

chart example of using a weekly view with a short term bottom formation - technitrader

This chart has a short term Bottom Formation that is sideways called a “Basing Bottom” which is one of the newer bottoms that form on the Short Term Trend. The compression out of this bottom creates moderate momentum. Compressions occur after each run of an average of 3 days. Candlestick pattern entries are based on resting day action with a “Shift of Sentiment™” on the Accumulation/Distribution indicator. Volume defines High Frequency Trading activity, however Professional Traders are in control of price in this chart example.

Basing Bottoms often have compression patterns that follow the completion of the base bottom. This kind of bottom has short-term momentum or velocity runs, that pause and rest at or below weak resistance out of that bottom.

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.