Candlestick signals: the spinning top

A one-day session with a variety of interpretations is the spinning top.

This is a session with a relatively small real body of either color, showing up about mid-range in the session, and with both upper and lower shadows longer than the real body.

The signal can occur at the top or bottom of a trend, or even in the middle. It can also mean reversal or continuation. This depends on what other signals are found at the same approximate point in the chart. Reversal is most likely when it shows up at the top of an uptrend or the bottom of a downtrend, and when you also see a change in momentum. So if the uptrend is accompanied by an overbought momentum signal, the spinning top indicates a coming downward reversal; and at the bottom of a downtrend, an oversold momentum signal makes upside reversal likely.

Continuation is most likely when accompanied by separate continuation signals found in separate candlestick formations. But caution: Because the spinning top can mean so many different things, it should always be used as part of a larger reversal or continuation signal, confirming other signs, and never relied upon by itself.

This is one of those candlesticks that can mean a lot of different things, or might just be a coincidence of price shape. So while the spinning top is useful, it is not definitive by itself. You need independent confirmation.

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