Module 5: Pullbacks, Retracements & Retests · Lesson 71/144
9 min 60 XP
A level or a pullback depth tells you WHERE price might turn. A confirmation candle tells you it actually IS turning. You never buy a falling pullback or a retest just because price arrived at the right spot — you wait for one of a small number of trustworthy candle configurations to CLOSE.
For a long, the trustworthy confirmations are: a bullish engulfing — an up candle whose body fully covers the previous down candle, showing buyers overwhelmed sellers; or a hammer / pin bar — a long lower wick that spikes into the level and closes back near the top, showing the level was tested and rejected. Either one, closed, says "the pullback is done."
Everything flips for a short: a bearish engulfing (a down candle covering the prior up candle) or a shooting star (a long upper wick rejecting the level, closing back near the low). Same logic, opposite direction. A close beyond the level in your favour with conviction is what you are after.
The wick is bait, the close is the signal
A doji or small indecision candle is “not yet”, keep waiting. A long wick that spikes the level but whose body CLOSES back on the wrong side is a failed test, often a trap. Judge every confirmation on the CLOSE, never on where the wick reached intrabar.