General Stock Ideas

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Stock Trader Education: Spot A Topping Tail

Smart investors and traders are always looking to expand their knowledge because they know it increases profits. In today’s lesson we will teach stock market traders and investors how to spot a topping and bottoming tail. There is strict criteria that must be seen to solidify if it is truly a topping or bottoming tail.

First, it is important to understand that topping tails are bearish reversal candles and bottoming tails are bullish reversal candles. Knowing this is half the battle. Next, we need to follow specific rules to determine whether or not the candle is truly a topping or bottoming tail. The rules are below…

For best results, a topping tail should only be noted on a stock chart at 52 week high. The prospective topping tail candle must be of solid size, no less than a 1% move intra-day on a large cap stock (best if it is 2-3%). The tail must be significant in length, making up at least 50% of the entire top-to-bottom range. The closing print for the day must be in the lower 25% of the candle, measured from top-to-bottom.

If all these hold true, you have a high success topping tail on the chart you are looking at. This would mean there is a great shorting opportunity present.

CHART: https://inthemoneystocks-4977.kxcdn.com/wp-content/uploads/2019/12/ToppingTail.png

Bottoming tails are bullish reversal stock chart candles. It shows epic accumulation by big money and an exhaustion of sellers. When it forms based on the below criteria, investors and traders should be looking to buy the bottoming tail. The rules are below…
For best results, a bottoming tail should only be noted on a stock chart at 52 week low.

The prospective bottoming tail candle must be of solid size, no less than a 1% move intra-day on a large cap stock (best if it is 2-3%).
The tail must be significant in length, making up at least 50% of the entire bottom-to-top range.

The closing print for the day must be in the top 25% of the candle, measured from bottom-to-top.

If all these hold true, you have a high success bottoming tail on the chart you are looking at. This would mean there is a great buying opportunity present.

CHART 2: https://inthemoneystocks-4977.kxcdn.com/wp-content/uploads/2019/12/BottomingTail.png


Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com (edited)