A “Buying Tail or Selling Tail” is a strong Auction Market signal. It is a signal of the strong rejection of the price area encompassed the the BT or ST. It is also an unequivocal directional tell: the market is likely to move away from the tail that forms. The dynamics of what is happening and why is a topic for another time, but the gist of it from a trader’s perspective is that a price area has been rejected and it is important information going forward that will help validate/invalidate the trend of the market in the time frame in which the tail occurred. Also, the trader is wise to consider favoring trades in the direction of the rejection – favor longs following a Buying Tail and favor shorts following a Selling Tail.
The guideline that validates a BT or ST is that one “rotation” of the same time frame of the BT or ST must complete with the BT or ST intact. There are many instances when a market will spike up or down and it appears a BT or ST is forming, only to have the market reverse and “cover” the potential tail.
Presently there are Buying Tails forming in the US stock indices. If Tuesday’s day session completes (March 19, 2013) and the tails are “still standing” it behooves the trader to honor the message of the market and a bullish working assumption should have the edge.