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June 12, 2009 / Jeb

New Gold (Great Candlestick Chart Pattern)

NGD 6-12-09

One of the best candlestick chart patterns that I look for when making trades or adding to positions is the hammer or hanging men.  In this case NGD has sold off after making a classic breakout.  Normal profit taking occurs after previous resistance levels are  broken to the upside.  This hammer pattern occurs when investors are taking profits and they put their trailing stop orders in.  The stock price goes down taking out the trailing stops and then buyers come in pushing the price up to the high.  This is a reversal pattern and the probability here of NGD going higher next week is great.

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