Levels and zones
Exhaustion
Heavy wicks at the end of a run that show buyers or sellers running out.
Practitioner rule, no published test found
Widely taught. The Exchange can test it on public price history and will say what it finds.
Related to pin bars, with the same weak evidence for candle signals.
What it is
A long wick at the extreme of a move, especially with shrinking bodies before it, marks a place where the last push was rejected.
What it suggests
A description of a tired move. It marks a decision point and says nothing certain about what follows.
How to check it
Note the wick, the run before it, and whether it formed at a level.
Common mistakes
- Calling every long wick exhaustion.
Sources
- Marshall, Young and Rose (2006), Candlestick technical trading strategies: can they create value for investors? Journal of Banking & Finance 30(8) (citation and headline finding only)
- Duvinage, Mazza and Petitjean (2013), The intra-day performance of market timing strategies and trading systems based on Japanese candlesticks, Quantitative Finance 13(7) (abstract or primary page read)
- Fock, Klein and Zwergel (2005), Performance of candlestick analysis on intraday futures data, Journal of Derivatives 13(1) (citation and headline finding only)
- Orquin-Serrano (2020), Predictive power of adaptive candlestick patterns in forex market: EURUSD case, Mathematics 8(5) (abstract or primary page read)
- Lu, Chen and Hsu (2015), Trend definition or holding strategy: what determines the profitability of candlestick charting? Journal of Banking & Finance 61 (citation and headline finding only)
Related lessons
Written in our own words. Education only, not financial advice.