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What are red-hollow and black-filled candlesticks?

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Candlestick coloring is a timely issue because many ETFs and stocks formed red-hollow candlesticks on Thursday (24-Feb-10). First, let’s review the different combinations possible. Colored candlesticks are made up of four components in two groups. First, a down close gets a red candlestick and an up close gets a black candlestick. Second, a candlestick is hollow when the close is above the open and filled when the close is below the open. The table below shows the four combinations.

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Each candlestick tells a price action story. In particular, the hollow candlesticks tell us that a security moved higher after its open. A filled candlestick indicates that a security moved lower after the open. This is important information. Moving lower after the open reflects weakness, while moving higher after the open reflects strength.

Red-hollow and black-filled candlesticks also convey important information on price action. Take for instance the red-hollow (no, it’s not a bird). Even though the close was below the prior close (red), prices managed to move higher after the open (hollow).Despite closing lower on the day, there was some evidence of buying pressure during the day. The black-filled candlestick is the opposite. Even though the close was above the prior close (black), prices moved lower after the open (filled). Despite closing higher on the day, there was some evidence of selling pressure. The chart below shows SPY with its second long-hollow-red candlestick in the last three weeks.

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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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Thanks for explaining color - hollow/filled combination, have not seen this explanation a lot of places, too many black-hollow or (I refer to as white candles) generally makes me think that bullish move.
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