in this example we have a range with a lot of wick’s at the bottom. A lot of you learned that wicks means rejection in the opposite side, that’s right in some way.
But in this case you can interpreter it as selling pressure, first thing first look at the current situation; AUDUSD is downtrending, and the trend is you’re friend,
most likely it’s gonna follow up in the direction of the trend. If there are some wicks to the downside it means that seller are entering the market in that specific zone,
but even that buyers are entering at the bottom of those wicks (another specific zone). So once we get a clear breaking of the “buyers zone” we can have a clear idea where
the market is gonna go, since the buyers are out of the market and sellers are taking over buyers.
Let’s take another example for a better understading of this concept
in this example we have again a clear trend, a “buyers zone” and a “sellers zone” and look what happen once we break the “buyers zone” we can clearly see a continuation
of the that we had before, since in that zone both buyers and sellers entered the market, so it create indecision in the market. you can see that we have a break above
the “sellers zone” as the exaustion of the last push, then it got below the “buyers zone” breaking the previous lower low and creating a possible continuation of the
current trend, resulting in momentum.
The main points of this lession are:
– wicks dosen’t always mean rejection, but can indicate market sentment
– follow the trend not the rejection.