- The Prime Wave
- Posts
- The Hanging Man
This is the weekly version of The Prime Wave. The weekly is free for all subscribers, daily updates of the Swingex Index are reserved for paid subscribers only.
THE BIG IDEA
We have had a 2-month rebound after the Trump Tariff Tantrum and the Swingex Index is sitting at a -2. This seems like a good time to take a closer look at a chart pattern we are more likely to see in these conditions. Plus we will mention an important pro tip. 😀
The Japanese were sometimes quite vivid in their naming of chart patterns, and the Hanging Man definitely falls into that category. A Hanging Man appears in an uptrend, and can often mark a bearish reversal in the trend.
What is it, actually? In simple terms, it means that price opened at a relatively high point and then dropped noticeably from there, only to bounce back to the area where it began. The price can even go higher than where it started. If you are looking at a candlestick chart, and use some imagination, it can resemble a stick figure of a hanging man.
The significance of it comes from the long lower part of the candlestick – the “shadow” or “wick”. You should take it as an indication that the trend may be turning. The ensuing mini-rally back towards, or beyond, the opening price should be viewed with some suspicion. It may be a last gasp rally from latecomers to the party. Remember, the pattern is only relevant after a long rally.
Or maybe not! This is where the pro tip comes into play. The candle that forms a Hanging Man looks exactly like a Hammer, a very bullish candle. And our pithy description of the Hanging Man – rallying back to higher prices after briefly going lower – doesn’t sound so bad.
The part of the Hanging Man pattern that most people forget is that it needs to be confirmed by the next candle. If the stock is dead, we should see it immediately. At a minimum, the next candle should close lower. Ideally, it should go lower than the low of the Hanging Man. Otherwise, the stock is likely to continue on its bullish way up.
Looking at the current market, shares of Expedia ($EXPE) have given us a good example of a Hanging Man.
The candle from Friday is our telltale Hanging Man. EXPE opened at $175 and closed at $176 but dipped down to $171 during the day. A closing price today below $175 would portend bad news for Expedia shares.
There was previously a Hanging Man on March 24th, which did not turn out well. A part of that was, of course, due to the Tariff Policy Of The Day at the time.
And, just for fun, we noted the bullish Hammer on May 22nd. Looks just like a Hanging Man, doesn’t it?
SEEN ON THE INTERNETS
Last week on StockCharts.com David Keller, CMT posted an article describing moving averages being in “proper alignment”.
What he meant by that is that a series of four moving averages would be in order from shortest time period to the longest. He is looking for this situation:
20-day moving average above the 50-day moving average, and
50-day moving average above the 100-day moving average, and
100-day moving average above the 200-day moving average
Mathematically, this means the stock has to be in an uptrend. Here is an example from his article, the current chart of Verisign.
What Keller is aiming for is to find stocks that have only just reached the “proper alignment” phase, as in the left-hand side of the green box above. As an added benefit, he says that looking at this set of moving averages can also help you to stay with an uptrending stock longer.
NUMBERS ONLY
3.33% | There is some buzz around small cap stocks now, after the Russell 2000 was up more than 3% last week. |
0 | Last Friday was the self-appointed day in the second quarter for S&P Global to announce changes to the constituents of the S&P 500 index. They made zero changes. |
204 | 204 stocks on the NASDAQ exchange made a 52-week low last week, the fewest since last July. |
SWINGEX INDEX
Swingy says: I know the market keeps creeping higher, but I am not amused. A Swingex Index value of -2 is telling me we should be hesitant to play. | As of market close on 6 June 2025- 2 |  |
See some historical examples of the Swingex Index in action here.
REWIND
Along with the daily value of the Swingex Index, we sometimes highlight stocks that could do well over the next 3 days to 3 weeks. This is a look back to 2-3 weeks ago to see how they have played out.
We pointed out one stock before market open on May 23rd.
$SNOW ( ▲ 0.31% ) - Snowflake was an earnings gapper the day before and made a new 52-week high. We thought it might have enough juice left in it to fill a previous gap from February 2024. It hasn’t filled that gap yet, but it has moved from $198.50 at the open that day to its current price of $210.84