Momentum and candle behaviour at levels

Levels tell you where to look; candle behaviour tells you what is happening when price gets there. Without indicators, momentum is read from the size, shape and overlap of candles. This lesson covers three ideas: rejection wicks, compression, and the difference between impulsive and corrective moves.

Anatomy of a candle

Each candle has an open, high, low and close. The body is the distance between open and close. The wicks (or shadows) are the parts of the range outside the body. A long wick shows that price travelled somewhere during the period but could not stay there.

Worked example: measuring a rejection wick

An illustrative EUR/USD 4-hour candle at a support level near 1.0950. Example prices only:

• Open 1.1000, high 1.1010, low 1.0950, close 1.1005.
• Total range = 1.1010 minus 1.0950 = 60 pips.
• Body = 1.1005 minus 1.1000 = 5 pips.
• Lower wick = 1.1000 minus 1.0950 = 50 pips (measured from the lower of open and close).
• Upper wick = 1.1010 minus 1.1005 = 5 pips.

The lower wick is 50 out of 60 pips, about 83% of the range. Sellers pushed price down to the support level, buyers absorbed the selling, and the candle closed near its high. That is a rejection of lower prices. Traders often call this shape a pin bar or hammer.

A rejection wick is more meaningful when:

• it forms at a level you had marked in advance, rather than in the middle of nowhere;
• it agrees with the higher-timeframe structure;
• the next candle follows through rather than immediately trading back through the wick.

A single candle is a small sample. Treat it as one piece of evidence, not a signal on its own.

Compression

Compression is a series of candles with shrinking ranges, often pressing against a level. For example, four consecutive candles with ranges of 40, 32, 25 and 18 pips show volatility contracting. Compression does not tell you the direction of the next move, but it often comes before an expansion.

Where compression forms matters. Price making higher lows while pressing against flat resistance (an ascending triangle shape) suggests buyers are willing to pay more each time, while sellers are holding one price. That is different from compression in the middle of a range, which tells you little.

Impulsive and corrective moves

Trends tend to alternate between strong moves in the trend direction and weaker moves against it. Learning to tell them apart helps you judge which side is in control.

In an uptrend, you would expect impulsive legs up and corrective pullbacks. If the pullbacks start to look impulsive (large, fast candles closing near their lows), the balance may be shifting, even before structure breaks.

Reading behaviour at a level

Put the pieces together when price reaches a level you have marked:

• Fast, impulsive approach into the level with no slowing: the level is more likely to break.
• Slowing approach, overlapping candles, then a rejection wick: the level is more likely to hold, at least at first.
• Compression against the level with higher lows (at resistance) or lower highs (at support): pressure is building towards a break.

None of these patterns works every time. Their value is in helping you decide whether a trade idea has supporting evidence, and in keeping you out when it does not.

Key takeaways

• Without indicators, momentum is read from candle size, closes, overlap and wicks.
• A long wick at a pre-marked level shows rejection; measure it against the full candle range.
• Compression shows volatility contracting and often precedes expansion, but not its direction.
• Impulsive moves are large, fast and non-overlapping; corrective moves are small, slow and choppy.
• Use candle behaviour as supporting evidence at levels, never as a standalone signal.