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How to Spot and Trade Reversals Hidden in Sheepish Price Action First, be sure to check this morning’s “Premarket Must Watch”! In trading, the details within price action often reveal more than the headlines ever could. One of the most overlooked yet powerful signals comes from understanding sheepish moves — those small, tight candles that appear in a trend before a sudden burst of activity. If you’ve been watching the S&P 500 recently, you’ve likely noticed some choppy, fragmented action. Take Monday of this week, for instance. The market opened near its highs, then started drifting downward in a tight channel. The candles were small, stacked right on top of each other, and the movement lacked volume or conviction. That’s a textbook example of sheepish price action. Here’s what that behavior tells us: 1. Lack of Momentum: Sheepish moves suggest there isn’t enough volume or commitment behind the price action. For a true trend to sustain itself, you need larger candles — clear evidence that buyers or sellers are in control. Without that, the trend is unlikely to follow through. 2. Washout Warning: When these tiny candles line up in a descending pattern, they often precede a washout move — a sudden flush lower, followed by a reversal higher. Monday morning’s S&P 500 price action captured it perfectly. After a long stretch of weak downward movement, the market gave us a washout candle, then started to climb back up. 3. Holiday and Lunch Traps: These patterns are especially common during fragmented weeks — like this one, with many traders away for Thanksgiving — or in the midday hours when volume tends to dry up. Without institutional players driving moves, these sheepish trends lack staying power. What does this mean for your trading? It’s simple… Don’t chase. For example, you might have seen the S&P 500 drifting lower and assumed it was the start of a meaningful sell-off. But the lack of large, directional candles should have been your first clue to stay cautious. Sure enough, the market didn’t collapse. Instead, it reversed sharply after the washout — just as expected. Here’s another clue… During strong trends, those washout candles rarely show up. If the market were truly bearish, we’d see fat, wide candles with conviction behind the selling. Sheepish moves, on the other hand, indicate hesitation. It’s the market saying, “I’m not sure where to go next.” This type of price action isn’t limited to indexes — it also applies to individual stocks. Whether it’s Tesla (TSLA) or eBay (EBAY), learning to spot sheepish moves and anticipating the washout can save you from costly mistakes. The takeaway is clear… When you see tight candles stacked together in a weak trend, don’t panic. Watch for the washout, then prepare for the reversal. That’s how you stay one step ahead of the market — and avoid getting caught chasing ghosts. I hope that helps! Half Day Tomorrow: Do This at 1 PM ET! I hope you enjoy your Thanksgiving meal and get to spend some quality time with friends and family. A quick reminder: Friday is a HALF DAY in the markets, closing at 1 p.m. ET… So that closing bell will ring a few hours early before we head off into the weekend. If you aren’t doing anything at 1 p.m. ET, I’d love to invite you to join me for my one-time 2024 Black Friday Training! 🎥 LIVE TRADE ROOM ACCESS 🎥 Join me and dozens of traders each day inside my LIVE VIP Trade Room! Each day, we analyze the markets together, build relationships and, more importantly… go over market education and new trade ideas! With the VIP Trade Room, you’ll have the opportunity to multiply your trading knowledge and confidence as quickly as possible. I’ll take the time to answer all of your trading questions, so fire away! Make sure to join us LIVE each day! SCHEDULE:
CUSTOMER STORY OF THE DAY Hi Roger, Got in on NDAQ after you recommended it, thanks so much for the tip!! I'm riding it to the upside and was wondering if you could recommend a target? Thanks again for your webinars and programs! Learning a lot and it's turning my trading around! Have my percentage above 75% and looking to go higher :) Thanks! — David Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. |
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