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This is a potent signal when it follows after a strong trend.
After an up-trend, a new High forms:
- With the Open near the High,
- The Close near the Low, and
- The Close must be above yesterday's Close.
After a down-trend, a new Low forms:
- With the Open near the Low,
- The Close near the High, and
- The Close must be below yesterday's Close.
The signals are most reliable if they occur after a strong trend. If the trend is weak, so is the signal.