The Mechanics Behind Reversal Candles
EDUCATION
1 min read
Reversal candles are one of the most powerful signals on a stock chart — but most traders misunderstand why they form. These aren't random patterns; they're often engineered by market makers accumulating shares for institutional clients. When price breaks below obvious support, retail stop-losses get triggered and short sellers pile on — creating the exact liquidity institutions need to build positions. The result is a sharp snap-back that leaves a long lower wick and a close near the highs. In this article, we break down the mechanics behind these formations and show you five real-world examples on Tesla's daily chart — each of which preceded rallies of 17% to 51%.
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