The vast majority of candlestick signals are trend reversal signals. However, there are still a group of candlestick patterns that constitute continuous technical indicators. In this kind of continuous pattern, most of them mean that the market is in a rest period and needs a breather. Then, the market will still return to the previous trend.
Japanese technical analysts have called price gaps a window for a while. According to Western expressions, we say “backfill gap”; in Japan, people say: “close the window”. In this part, we first elaborate on the basic concept of windows, and then discuss other forms that include windows (price gaps). In such candlestick patterns, gaps include parallel black and white lines, gap breakthrough patterns, and gapping white candle lines.
The so-called window means that there is a price gap between the end point of the previous candle line and the end point of the next candle line. As shown in Figure 7.1, it is an “open” window formed in the upward trend. There is a price gap between the upper shadow line of the previous candle line and the lower shadow line of the latter candle line in the figure. As shown in Figure 7.2, it is a window in the downward trend. It can be seen that, between the lower shadow line of the previous day and the upper shadow line of the day, no price activity has occurred. According to Japanese technical analysts, market participants should establish positions in the direction of the window. At the same time, the window will also evolve into a supporting area or a blocking area. Therefore, in the rising market, if a window appears, it means that the price will rise further. And, when the market retreats downwards in the future, this window will form its bottom support level. If the market closes this window when retreating downwards, and after the window is closed, the selling pressure of the market still exists, then the previous upward trend is no longer established. Similarly, in a falling price environment, if a window appears, it means that the market will fall further. Any upward price rebound formed thereafter will encounter a block at this window. If the stay is closed, and after the window is closed, the upward market continues to develop, then the original downward trend is over.
Traditional Japanese technical analysis theory (that is, candle chart technology) is convinced that if a market begins to adjust after a window is formed, then the price will return to that window. In other words, the market is likely to go back and try an open window. Therefore, in the upward trend, we can regard the window as a reference point for buying, and enter the market when the market retreats here. On the other hand, if after the window is closed, the selling pressure of the market still does not subside, then you should close out the long position and even consider establishing a short position. If a window appears in the downward trend, countermeasures should be taken contrary to the above.