Bar Chart Analysis
price spikes
In emotional markets, price often produces a spike as a result of increased volatility.
These bars are usually wide‐ranging bars accompanied by high volume. In
Figure 7.29, we see a large emotional price spike on high volume on the daily
chart of Mad Catz Interactive Inc. We also notice a typical three bar bearish rever-
sal forming a top in the stock.pin Bars
Pinocchio bars or Pin bars, are single bar misrepresentations of market strength or
weakness. It is an intra‐period price penetration of some barrier, suggesting a poten-
tial breakout. Price rapidly retraces back below resistance or back above support.
A upside pin bar breakout gives traders a false impression of bullishness in a down-
trend, whereas a downside breakout gives traders a false impression of bearishness
in an uptrend. Pin bars normally breach the following common price barriers:■ (^) Moving averages
■ (^) Levels of resistance or support
■ (^) Trendlines
Pin bars differ from exhaustion bars. Exhaustion bars do not usually provide
a false impression of price penetrating a barrier. Pin bars may also be an artifact
of specialists running stops.
In Figure 7.30, we observe a pin bar breaching support on the daily chart of
Micron Technology Inc. Many traders would have been fooled into initiating a
short position upon seeing the breach of support. Pin bars are usually breakouts
that form on low volume.
Figure 7.29 Emotion Spike Bar on the Daily Chart of Mad Catz Interactive Inc.
Courtesy of Stockcharts.com