I usually don’t pay that much attention to technical analysis of market charts—mainly because I don’t understand them all that much.

But here is something that I found very insightful, from Scott Pluschau.

Gold-Dec-2011

The Gold Futures today formed a single candle called a "Hammer" on the Daily chart.  This is a well known and popular reversal pattern in Japanese Candlestick analysis.  The hammer shows strong demand at lower prices in the auction. The lower wick of the candle has to be multiple times the size of the body of the candle which can be seen in the chart where I drew a blue oval.  It would be even more bullish if the closing price was higher than the open. 

The hammer in theory represents a turning point, since the Bears tried to push lower but got rejected, weakening them…and now there’s potential for the Bulls to start a short squeeze.  This single candlestick pattern needs confirmation.