✅ Lesson 2.3 – Price Movement Demonstration

Learn how candlesticks and support/resistance interact in real price action scenarios.

🎯 Lesson Objective

So far, we’ve studied individual candlesticks. Now, it’s time to see how they work in sequence, how they form patterns, and how these patterns reflect trader sentiment in different market contexts.

In this lesson, we analyze actual price movement on a chart using:

• Candlestick patterns

• Support/Resistance (S/R) levels

• Price structure and trend context

🕯️ Candles Are Time-Frame Dependent

Each candlestick represents price action over a set time period (1-minute, 1-hour, daily, etc.).
Smaller candles form part of larger time-frame candles.
This fractal nature of candlestick charts helps traders spot patterns on both micro and macro levels.

🔄 Candlestick Sequences & Patterns

Certain consecutive candles form predictive patterns. This is the essence of price action analysis — reading market psychology through patterns, not just indicators.

One of the most important patterns introduced here is the engulfing candle.

🔍 What is an Engulfing Candle?

• A candle that reverses the direction of the prior candle.

• The body of the engulfing candle completely covers the body of the previous candle.

• It signals a potential reversal or strong continuation, depending on context.

📘 Real Chart Case Study: June–July Price Action (EUR/USD)

Let’s walk through Points A to I, analyzing real chart behavior using candles and S/R logic.

A. June 21–22: Tweezer Tops (Bearish Signal)

• Two consecutive long upper wicks at 1.4400 signal strong resistance.

• Likely due to profit-taking and new short entries at a round number level.

• A reversal becomes likely.

B. June 23: Long Lower Wick (Rejection of Support)

• Price falls but recovers significantly before closing.

• Long lower wick shows buyers stepped in at around 1.4130.

• Sellers took profits and buyers defended the level → early sign of support.

C. June 23–26: Support Confirmed at 1.4130

• Repeated tests of support without breaking down = strengthening S/R.

• Small red candles suggest fading selling pressure.

• Buyers begin preparing for a reversal.

D. June 27: Bullish Engulfing (Reversal Signal)

• Large bullish candle engulfs previous two days of price.

• Price closes near the high — strong buyer control.

• Signals likely trend reversal or start of a new uptrend.

E. June 30: Long Upper Wick (Stalling Rally)

• Price attempts to rise but is rejected.

• Weak close despite high — shows resistance above.

• Signals trend exhaustion, confirmed by reversal soon after.

F. July 3–4: Hanging Man (Bearish Reversal)

• Small body, long lower wick during an uptrend.

• Market opens above 1.4550 but fails to hold gains.

• Next candle closes lower → confirms reversal pattern.

G. July 12: Hammer (Bullish Reversal)

• After an extended downtrend, a hammer forms at 1.4000 support.

• Long lower wick shows rejection of lower prices.

• Next day: Bullish engulfing candle confirms reversal → price moves higher.

H. July 17: Doji (Indecision at Support)

• Candle opens and closes at nearly the same price.

• Market is undecided near strong support.

• Doji with long lower wick suggests buyers are returning — bullish setup.

I. July 25: Perfect Doji (Neutral Balance)

• Equal-length wicks and a tiny body indicate complete market indecision.

• Useful as a pause candle, especially after strong moves.

🧠 Key Takeaways

• Patterns have meaning only in context: A hammer is bullish after a drop but not in a strong uptrend.

• Support and resistance define the battlefield: Candlestick patterns are signals; S/R is the battleground.

• Confirmation matters: A signal like a hammer or hanging man needs a confirming next candle.

• Price action tells a story: Wicks = testing levels. Bodies = directional commitment.

📘 In the next lesson, we’ll dive deeper into recognizing multi-candle patterns and combining them with structure to build high-probability trade setups.