The Kill Candle

For both examples, I used a 27-session window beginning with the event candle. The range comparison excludes that candle and measures the following 26 sessions against the prior 40. The gap rates compare the prior 27 sessions with the following 26, excluding the event candle.

After the liquidation candles, the average daily range widened 51% following October 10 and 56% following June 5. That is what made the change so difficult. The market stopped trending, but each day became much wider anyway. Direction reversed on 16 of the next 26 sessions in both samples, and QQQ finished those periods 1.2% and 3.1% lower. There was more movement to sit through without a trend paying for it.

The big overnight gaps made it harder too. During the uptrend before October 10, none of the sessions opened 1% or more away from the prior close. After the candle, 31% did. Before June 5, 15% of sessions had a 1% gap. After it, that jumped to 42%. A lot more movement was happening before the session even opened.

This period also showed up clearly in my feedback loop. It became harder to make progress in individual stocks because the market was no longer carrying even the cleanest setups, and the feedback from my trades kept getting worse. That naturally had me reducing exposure, sizing smaller, or not trading at all.

June 5 does not tell me another March correction has to happen, and October 10 did not mark the final top either. QQQ recovered, made a new high later that month, and did not reach a 10% correction until March. The useful change came earlier. After that candle, the easy trend was gone and the next several months were wider and less directional.