In candlestick analysis, the Shadow refers to the lines that extend above or below the main body of the candle. There are two types of shadows, the upper and lower shadows. The upper is the line that extends above the body of the candle while the lower shadow is the line that extends below the body of the candle.
This candlestick help to indicate the highs and lows of the price during the period represented by the candle. Long or tall shadows, according to some technical experts, indicates that the stock may turn or reverse. Some people think shorter or lower shadows portends an impending price increase.
Put differently, a tall top shadow portends a decline, while a tall lower shadow portends a rise. When the price moves throughout the interval but then declines again. It creates a towering upper shadow, which is a negative signal. When bulls pull the price back up after bears push it down, a lengthy line is left behind, forming a taller lower shadow.
Technical analysts perceive this indication as a bullish sign. The length of these shadows gives traders and analysts important information, explaining how and why security performed as it did over a specific period.
How to Identify a Shadow Candlestick
On a candlestick chart, shadows are the lines that appear above and below the body of a candlestick. Traders refer to the upper shadows as wicks and the lower shadows as tails.
The upper shadow’s top represents the highest value in the data set, while the lower shadow’s bottom represents the lowest value.
Each configuration of a shadow has open, closed, high, and low and they are referred to as the stock prices. The candlestick pattern is made up of these values. The body of the candlestick is the box component that can be filled or left empty.
