Several months ago I was thinking about candlestick charts and whether or not these classic patterns had any predictive ability for trading. I had a look around but all I could find were vague speculations and cliches. I couldn’t find any solid evidence of whether they actually worked or not.

So… I thought I would casually test out a few candlestick price patterns and see if any of them actually worked.

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Last Friday the S&P 500 formed a shooting star candlestick pattern on the daily chart. This is a Japanese candlestick formation that is normally a bearish reversal signal. Sure enough, the S&P 500 moved lower the next day, dropping around 15 points. We saw this happen last September too. But how often does this bearish pattern really play out?  Read more »