the hAndbook of technIcAl AnAlysIsnarrow range candlestick be no more than one‐fourth to one‐third the range of
the larger preceding candlestick. But an inside bar has no such restrictions.
exhaustion Bars
Exhaustion bars are regarded as reversal bars. In an uptrend, they open above
the previous bar’s high. The larger the bar, the more bearish it will be within the
context of an uptrend. There is no gap between the exhaustion bar and the subse-
quent bar, unlike in single bar island formations. The exhaustion bar should close
at or near its low in an uptrend. The reverse is true for bullish exhaustion bars in
a downtrend. In Figure 7.28, we see a bullish exhaustion bar forming a bottom on
the daily chart of J.P. Morgan Chase & Co.
Figure 7.27 Various Inside Day, Outside Day, and Three‐Bar Reversals on the Daily
Chart of Alacer Gold Corp.
Courtesy of Stockcharts.com
Figure 7.28 Bullish Exhaustion Bar on the Daily Chart of J.P. Morgan Chase & Co.
Courtesy of Stockcharts.com