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2014issue C0228-30

Small-range bars as a timed volume-climax hypothesis

A small-range bar marks a brief, unstable balance of buying and selling. Editorial reading treats that bar as a timed hypothesis window, and treats the next volume expansion as the test of whether price is breaking out of the standoff or exhausting at a climax.

  • A small-range bar, often a doji, is read as a short-lived buyer-seller balance that is not expected to persist.
  • Near a high the bar is treated as a likely downward turn; near a low it is treated as a likely upward turn. A topping tail is read as control shifting to sellers, and a bottoming tail as control shifting to buyers.
  • Rising price with rising volume is treated as confirmation that participation supports the move. A volume climax is presented as a possible start or end of a trend and is said to need later-bar or additional-indicator confirmation.
  • In the illustrated case, a small-range bar with rising volume after a volume spike was labeled a bottom buy cue, and a later small-range bar with rising volume was labeled a top.
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Current trackCandlestick patterns100 readingsVolume-price analysis129 readingsBreakout confirmation172 readings

What a small-range bar marks

A small-range bar is a session whose open and close sit nearly together. It is interpreted as a short-lived balance of buying and selling that is not expected to persist. On candlestick charts those bars appear as dojis. When a doji forms near a high it is treated as a likely downward turn. When it forms near a low it is treated as a likely upward turn.

Small-range bars after an uptrend on high volume can mean buyers are hesitating at that level. After a downtrend on high volume they can mean sellers are hesitating.

Tails and named candlestick forms

A topping tail on a small-range bar is read as control shifting from buyers to sellers. A bottoming tail is read as control shifting from sellers to buyers.

Named candlestick variants of small-range bars include a dragonfly doji and a hammer as bullish forms; a gravestone doji, a shooting star, and a hanging man as bearish forms; and spinning tops as two-way change cues.

Volume confirmation and climax

Rising price with rising volume is treated as confirmation that participation supports the move. Rising price with falling volume is treated as a price-volume divergence that can precede a reversal.

A volume climax is high volume with a sharp advance or decline. It is presented as a possible start or end of a trend and is said to need later-bar or additional-indicator confirmation.

Price falling while volume rises is treated as possible panic selling or churning, and as a caution until the cause of the divergence is identified.

The illustrated case

In the illustrated case, a 2013-06-24 small-range bar (high 89.49, low 88.02, close 88.48) with rising volume after a 2013-06-21 volume spike (high 90.14, low 88.85, close 89.48) was labeled a bottom buy cue. Later receding volume while price rose was treated as a climax.

A later 2013-08-01 small-range bar (high 93.10, low 91.25, close 92.73) with rising volume was labeled a top. After that bar, declining volume was treated as a sell cue between 91.00 and 92.00.

Exxon Mobil daily close, March–October 2013

A trader should see the June 24 small-range close at 88.48 after a volume surge — the article’s long — and the August 1 small-range close at 92.73 where volume expands again and the short is taken, then the August break. Weekly closes were read from the published StockCharts daily figure of XOM; the June 21, June 24, August 1 and October 31 prints are the figures given in the article and on the chart header.
A trader should see the June 24 small-range close at 88.48 after a volume surge — the article’s long — and the August 1 small-range close at 92.73 where volume expands again and the short is taken, then the August break. Weekly closes were read from the published StockCharts daily figure of XOM; the June 21, June 24, August 1 and October 31 prints are the figures given in the article and on the chart header.XOM · Daily · 2013-03-04T00:00:00.000Z to 2013-10-31T00:00:00.000Z

Unlabeled weekly closes are read to the nearest tenth of a dollar from the 0.50 price grid. The source also plots volume with a 60-day EMA near 12.5 million shares; that pane is omitted because it does not share the price scale.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
40 of 54 in the Candlestick patterns track
201410-15 pp.Next on Candlestick patternsConstructing volume-scaled candlestick chartsAfter news and fundamentals are set aside, the technical record of a session is five session fields: open, high, low, close, and volume.
All readings on this track · 54 readings
  1. 1990Constructing three-session rally and reaction volume signals
  2. 1991Constructing candlestick real bodies and multi-session patterns
  3. 1991Treat a candlestick reversal as incomplete until %D confirms it
  4. 1991Filtering candlestick signals with stochastic percent-D
  5. 1991Constructing compressed candlestick summaries
  6. 1993Intraday candlestick confirmation with oscillators
  7. 1993Candlestick hypotheses from a 1993 reading list
  8. 1994License candlestick signals with oscillators and weekly vetoes
  9. 1995Real-body support, resistance, and close-through breakouts
  10. 1997Weekly reversal as a three-part hypothesis
  11. 1998Turning fear levels into testable rules with a psychological matrix
  12. 2000Evaluating three-bar reversal reliability
  13. 2000Prior-day candles, open confirmation, and same-session stops
  14. 2000Intraday candlestick volume confirmation for daytrading
  15. 2001Count the key reversal up before coding a mechanical exit
  16. 2001Rising and falling three continuation candle construction
  17. 2002Treat a moving average as a contested fence
  18. 2003Candlestick signals need support and a risk-reward screen
  19. 2003Constructing one-day reversal tops and bottoms
  20. 2003Chart sentiment as a regime filter for hourly stochastic entries
  21. 2004Confirming index reversals with candlesticks, stochastics and averages
  22. 2004The harami inner close as a reversal barometer
  23. 2004Constructing a true-range volume power-shift filter
  24. 2005Weighing reversal clusters against moving-average support
  25. 2005Candlestick exits confirmed by overbought stochastics
  26. 2005Confirming piercing patterns with stochastics and moving averages
  27. 2006Candlestick cluster exits confirmed by overbought stochastics
  28. 2007Three black crows become a trade hypothesis only after regime, trend and nearby levels
  29. 2008Asymmetrical RSI lookbacks for divergence and candle confirmation
  30. 2008A permission checklist for the end of a trend
  31. 2010Mechanical entries still need confirmation gates
  32. 2010Crude oil as a case study in candlestick session reading
  33. 2010Gold weekly candles and the thousand resistance breakout
  34. 2010A three-layer gold chart drill from waves to candle confirmation
  35. 2011Why entry scans fail without trend filters
  36. 2011Price-zone oscillator trend-regime rules
  37. 2011A candlestick checklist before commodity entries
  38. 2013Step candle construction at price turning points
  39. 2013Two-bar step-candle construction
  40. 2014Small-range bars as a timed volume-climax hypothesis
  41. 2014Constructing volume-scaled candlestick charts
  42. 2015Weekly range midpoints as support and resistance
  43. 2015Constructing weekly body-midpoint pattern codes
  44. 2015Evaluating encoded candlestick sequence hypotheses
  45. 2015Constructing a breakout relative-strength index from two-day range candles
  46. 2016A three-gate classroom on hourly sterling
  47. 2016Fibonacci retracement as a pre-commitment stop map
  48. 2017Nine-zone filter for decade-level breakouts
  49. 2017Constructing pin-bar and inside-bar setups
  50. 2017Two-bar soldier and crow rules become a system only after filters and exits
  51. 2017Confirm a one-white-soldier or one-black-crow before entry
  52. 2018Session control from marubozu and engulfing geometry
  53. 2019Volume, acceleration, and candle filters on a completed double bottom
  54. 2019Sector-filtered candlestick scans and predrawn stops
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