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Storm Ridge · Camp 2 · Lightning Rock

The news candle

The ridge's highest point is a black rock where lightning strikes most often: Lightning Rock. When the data hits, price strikes the same way: one long spike in a single candle, wicks in both directions. Here you'll learn not to run at the first lightning, and to see when the path opens.

The camp's rules

  1. 01

    A news candle is longer than every candle before it and often leaves long wicks on both ends: stops on both sides get taken.

  2. 02

    You can't trust the direction of the first spike: price can shoot off and snap back in the first few minutes. Don't trade the first candle, whether in the spike's direction or on a hunch. You'll see the one exception at the Stone Bridge: a news candle that sweeps a clear pool and closes back on the old side.

  3. 03

    The high and low of the news candle are the edges of the storm. If price is swinging back and forth inside that range, the storm is still going; a strong close outside one of the edges shows the direction. As at Pass Mouth, look for the entry on the retest.

  4. 04

    Chasing the spike means getting in at the most expensive spot in the move: a meaningful stop is far away, and a tight stop gets hit on the first pullback.

  5. 05

    Wait for the first pullback. If price holds roughly halfway back into the spike, it usually carries on in the spike's direction. Enter on the hold, with the stop beyond the point where it held.

  6. 06

    If price gives back the whole spike and returns to where it started, the push from the news has died out: no trade.

Teaching

The news candle

The moment the data lands, a single candle's range can outgrow the range of dozens of candles before it.

It often leaves long wicks on both ends: first the stops on one side get taken, then the other.

Wherever it closes, the first candle is an explosion, not a verdict.

Bora · Weather watcher

The news range

The news candle's high and low are the edges of the storm. In the hours that follow, price often comes back to these two edges and tests them.

If price keeps swinging inside the news candle, the storm is still going.

A strong-bodied close outside one of the edges says the direction is starting to show. As at Pass Mouth, the entry is on the retest: price comes back to test the edge it crossed, and if it holds, you get in.

Bora · Weather watcher

The most expensive spot

After the data, price moves hard in a candle or two. Your eyes see the move, and your hand wants to jump on the train.

But the tip of the spike is the most expensive spot in the move. To put your stop somewhere meaningful, you'd have to take it all the way back to where the spike started: the risk gets huge.

A spike is usually followed by a pullback as early buyers take profits. That's where anyone who bought the tip with a tight stop gets taken out.

Bora · Weather watcher

The train stops at the station

After a spike, price usually catches its breath and pulls back: early buyers take profits, and chasers get stopped out.

If the pullback holds roughly halfway back into the spike, the news direction is usually still in play. That's where you enter with a small stop, below the low that held.

If price gives back the whole spike and returns to where it started, the push from the news is gone: no trade.

Bora · Weather watcher

Lessons · 5

  1. Story

    Lightning Rock

    See why you don't run at the first lightning.

  2. Lesson

    Anatomy of a news candle

    Recognize the news candle and read its high and low as levels.

  3. Lesson

    Chasing the train

    See why getting in at the tip of the spike costs so much.

  4. Lesson

    The first pullback

    Find the halfway hold after the news and enter there.

  5. Exam

    Lightning Rock exam

    Test yourself on the news candle, chasing and the first pullback.

Test yourself

The news candle left a long upper wick and closed below its open. What does this tell you?
  • ✓ Buyers pushed first, then sellers took the candle back: the first spike couldn't hold
  • · The candle closed up
  • · Wicks don't matter; only the body counts

As you learned at the Harbor, an upper wick means 'tried, but couldn't stay.' On a news candle, it shows the first spike's direction didn't hold.

For two hours, price has been swinging between the news candle's high and low. What does this tell you?
  • ✓ The storm is still going; no direction yet
  • · An uptrend has started
  • · The news is done; no more moves now

Inside the news range is the storm itself. Until you see a strong close outside one of the edges, there's no direction.