Squat candlesticks often indicate a potential reversal in market trends. Typically, they suggest uncertainty about the current market direction, and they are commonly observed at specific price levels. These squat candlesticks, characterized by a small body and a long shade, may appear singly or in multiples. If you encounter a candlestick with these features, be vigilant as it could signal an impending reversal in the current trend.
What to do after you see this signal:
1) If you see a squat candlestick has appeared be prepared to open a deal.
2) A squat candlestick is followed by a new reversal candlestick.
3) After closing a new candlestick open a deal in its direction.
Buying a call after a squat candlestick
If you see a trend continuation following the appearance of a squat candlestick, it's best to consider the signal canceled. Similarly, in the case of an engulfing pattern, it's essential to wait for the closing of a new candlestick after the squat one to confirm a reversal.
Keep in mind that consecutive squat candlesticks may indicate market uncertainty. For a deeper understanding, explore various squat candlestick patterns through books on candlestick analysis.