A long white candlestick at the end of a decline is a strong indication that the sellers are running out of steam and the bulls are entering the market aggressively.

Now that we have defined it, we need to pause for a while and explain the term long. Well, long refers to the real body being longer than the average body-length of the recent candlestick-bodies.

Some traders consider a long real body to be about 3 times longer the size of the previous body. I take a slightly different approach. Consider the average length of the last 25 real bodies then double the size. Perhaps you can come up with a different method. Why not?

So, what are the specifications of the long white body?

  1. The real body is longer than the average size of the recent candlestick bodies.
  2. It has a tiny or no upper shadow at all.
  3. It has a tiny or no lower shadow.
  4. The close price is much higher than the open price.

Now, let’s talk take a look at potential buy setups. Say that you identify a long white real body at a support area. How do you feel about it? What do you think is going to happen next? If you say upward movement then I agree with you. So, a buy right above the high of the candle and a stop loss just under the low price. Also, a long white body breaking above a downtrend line would signal a reversal, right? The same goes for a breakout above a resistance line. At times after the formation of a long white body a correction is not uncommon as the price becomes overbought too fast.

Well, this may provide a different buy setup at a lower price and more specifically near the midpoint of the body. Needless to mention that the stop loss remains at the low price.