Bearish Candlestick Acting As New Resistance

Long bearish candlesticks are typically oversold and consequently are subject to bullish reversals. However, the opening of the large bearish candlestick can sometimes be used as a new resistance level. As can be inferred from a large bearish candlestick, the bears were confident in selling at the area of the open of the large bearish candlestick; in addition, the bulls were unable or unwilling to buy and thus the bears were able to sell without much opposition throughout the entire trading day. When prices begin to move upward over time entering into the price levels where the long bearish candlestick was formed, the same price level is finally reached where previously the bears were able to strongly sell and the bulls were unable to push prices higher. Thus, an overhead resistance is created. The chart above of the Utility SPDR (XLU) illustrates how the opening of the long bearish candlestick acted as resistance for future prices.