Introduction
This article outlines a practical workflow for analyzing the NAS100 with candlestick charts. It focuses on pattern identification, volume confirmation, price-news correlation, trade setups based on confirmed signals, and a routine for weekly updates. Follow the steps and checklist to reduce errors and align trades with market context.
1) Identifying key candlestick patterns
Start every session by scanning multiple timeframes (1H, 4H, Daily) for reliable patterns. Prioritize patterns that indicate clear sentiment shifts:
- Doji: signals indecision; look for follow-through rather than trading the Doji alone.
- Engulfing (bullish/bearish): stronger reversal signals when larger candle fully engulfs the prior body.
- Hammer / Hanging Man: assess location—support bounce or resistance failure.
- Morning Star / Evening Star: three-candle reversals showing transition in control.
Mark the pattern, record the timeframe, and note the immediate support/resistance levels nearby.
2) Analyzing volume spikes
Volume is the confirmation layer for price patterns. For NAS100, check volume on the same timeframe as the pattern and on a higher timeframe:
- High-volume engulfing candle: increased likelihood of a sustained move.
- Volume spike without price follow-through: possible liquidity sweep or news-driven spike—treat cautiously.
- Volume drying up near resistance/support: suggests weak conviction and higher chance of failure.
Always compare volume to the recent average (e.g., 20-period moving average of volume) to judge significance.
3) Correlating price action with market news
Candlesticks reflect both technical supply/demand and fundamentals. Before trading a pattern, check for relevant economic releases, earnings, or geopolitical events that could be driving the move. Practical steps:
- Scan economic calendar entries for the session and prior 24 hours.
- Read headlines for sector-specific catalysts (tech earnings, chip shortages, regulatory news).
- If a pattern aligns with a credible fundamental catalyst, give it more weight; if it contradicts solid news, be cautious.
4) Setting up trades based on confirmed signals
Use a rules-based trade entry that requires pattern + volume + contextual confirmation. Example workflow for an entry:
- Pattern identified on 4H chart (bullish engulfing at prior support).
- Volume spike on the engulfing candle exceeding recent average.
- Higher timeframe (Daily) shows neutral-to-bullish structure or support holding.
- No major adverse news on the economic calendar; sector headlines supportive or neutral.
- Entry: place a limit or market order after candle close and a small pullback (optional). Set stop-loss below recent low and initial target at the next resistance level.
Position size should reflect risk management: define a dollar or percentage risk per trade and adjust size accordingly. Use trailing stops or partial profit-taking to lock gains on strong moves.
5) Regularly updating analysis with weekly recaps
Schedule a weekly recap to refresh bias and manage open trades. The recap should include:
- Review of patterns that occurred during the week and whether volume confirmed them.
- Re-evaluation of key support/resistance and trend structure on Daily/Weekly charts.
- Summary of news events that affected price and any changes to market context.
- Adjust stop levels, targets, and position sizes based on updated analysis.
Common mistakes to avoid
- Ignoring volume when interpreting patterns—without volume confirmation, patterns are unreliable.
- Misinterpreting candlestick colors—focus on relative open/close and context rather than color alone.
- Failing to consider market context—patterns in isolation often produce false signals if broader trend or news contradicts them.
Checklist before placing a trade
- Check for pattern confirmations on the intended timeframe and at least one higher timeframe.
- Analyze previous support/resistance levels that define stop and target placements.
- Review market news for catalysts or risks that could invalidate the setup.
- Validate signals with multiple timeframes (entry timeframe and higher timeframe alignment).
- Maintain risk management practices: pre-defined stop-loss, position sizing, and exit rules.
Following this workflow will help you interpret candlestick signals on NAS100 more reliably, reduce impulsive trades, and keep your analysis aligned with market structure and news. Consistent weekly reviews close the loop and keep your edge adaptive.
