Usually the stock opens at or near the high of the day and moves down throughout the day and closes at or near the low of the day. The extent of the move down should be signification enough to get noticed. Usually its should be looked in comparison with the previous week’s data. All the above candlesticks in the picture represent long bearish candlestick pattern formation. One rule you should always remember is closer the closing price near the low and longer the length of the body more important the candle becomes in the stock market analysis. Also if the market has moved up significantly and other indicators point to oversold condition, this increases the probability of bounce back. The significance and degree of bearishness decreases with the decrease in length of the body and increase in length of the lower shadow
When the market is in extended upmove and a long red candle is formed, then it is usually a sign of reversal. It’s not guaranteed that the market would reverse, but probability of reversal has increased. When such incidents happen, you need to watch the market closely for other reversal signs
When the market is flat and if a bearish long red candlestick pattern is formed, then usually it’s a sign of breakout. If this candle formation happens with increasing volume, then the probability of breakout increase. Breakout can be breaking out of trend lines or crossing a critical moving average or breaking out of a range by crossing the resistance area. Usually its better to look at those scenarios when the prices trades through the price point instead of gap up opening and crossing the price point.
If a bearish long red candlestick pattern gets formed near a support area or near a moving average then usually its a sign that the support is respected and you can expect a bounce from there. This is usually a good signal for mean reversal strategy or an entry point after a short correction. Also traders can use this signal during range bound market
Usually a long candle acts as support especially when there is a breakout. Some traders trade the breakout by keeping high of the red long candle as stop loss , whereas some traders wait for retracement and trade when the prices retraces about 40 to 50%. It all depends on the individual traders and their trading style