We frequently assume during trading hours that a long Wick (Shadow) on a regular candle portends a probable change in direction (which is frequently the case).
Do you ever look at Wicks (Shadows) on candles after hours and try to understand their meaning?
First of all, the end of a Wick (Shadow) is actually a price level that has been tested. These price levels are not only tested during trading hours but are tested after hours as well. After hour shadows have a different meaning for the next few option trading days.
As a rule I always look at Wicks (Shadows) on five minute after hour charts, “especially paying attention to the longest after hour shadows”. I then mark the longest with a price line as support/resistance which will inevitably be reached 100% of the time (my experience is that these levels are usually reached on, or before, the next Friday’s expiration).
Price lines can be found in your Drawings Drop-down box. I use the one with the underlined $ symbol. I use a different color and leave them in place until that price is reached and then erase them.
I am showing a picture of MSFT after hours for last night and have marked two levels: A High Price Level of 394.35 which has already been reached. The Lower Price Level (389.33) is still active. At this point MSFT has crossed the upper price line and should be removed. Also notice that it has reached a double top with shadow above. The lower Price Level is still in place and will be reached in the future (I can almost guarantee since it hasn’t failed to work for me as yet).
To erase a Price Level Line put your pointer on the line and click “Remove Drawing”.
Do you ever look at Wicks (Shadows) on candles after hours and try to understand their meaning?
First of all, the end of a Wick (Shadow) is actually a price level that has been tested. These price levels are not only tested during trading hours but are tested after hours as well. After hour shadows have a different meaning for the next few option trading days.
As a rule I always look at Wicks (Shadows) on five minute after hour charts, “especially paying attention to the longest after hour shadows”. I then mark the longest with a price line as support/resistance which will inevitably be reached 100% of the time (my experience is that these levels are usually reached on, or before, the next Friday’s expiration).
Price lines can be found in your Drawings Drop-down box. I use the one with the underlined $ symbol. I use a different color and leave them in place until that price is reached and then erase them.
I am showing a picture of MSFT after hours for last night and have marked two levels: A High Price Level of 394.35 which has already been reached. The Lower Price Level (389.33) is still active. At this point MSFT has crossed the upper price line and should be removed. Also notice that it has reached a double top with shadow above. The lower Price Level is still in place and will be reached in the future (I can almost guarantee since it hasn’t failed to work for me as yet).
To erase a Price Level Line put your pointer on the line and click “Remove Drawing”.
