Many technical traders setup charts on their screen and quite often those charts will display price in a candlestick format. Candlesticks are one of the oldest form of charting price and over the decades many have noticed patterns that seem to repeat or give a clue as to the next likely move. One of those clues comes in the form of one bar. Some stocks are notorious for giving one bar warnings so today we will take a look at spotting them.

What we are looking for is one strong candlestick followed by an equally strong (or stronger) candlestick in the opposite direction. The first thing to find is a strong move in one direction which is signified by a candlestick where the prior close and current close are farther apart than usual.

Taking a look at the chart we see a strong green candlestick where this is true. Looking around we can see that this is an abnormal move. The very next candlestick completely erases the "one bar" thus giving you a warning sign. That warning sign helped you avoid an 11% decline in price over the next few weeks.

If you notice, this reversal came in the midst of an uptrend. For the few weeks prior all was good and the stock was moving higher and higher. So what happened? Buyers reached a point of pure greed and were chasing the stock. This move was immediately followed by sellers taking their profits which scared those that just entered which caused them to exit as well. The point is if you can find these one bar reversal warnings in a trend they can provide for some powerful moves.

As a bull this one bar reversal sign can be a great reason to take some of your position off or raise your exit price. As a bear it could be a great sign for you to try a short position. Either way, take a look at a few charts and see how the one bar reversal warning sign could have helped you.