Using a proprietary dataset of 65 post-earnings momentum set ups, I analyzed whether the length of the first hourly earnings candle’s wick affected next-day price action. Setups featuring long momentum-end wicks hit a +9% profit target just 25.0% of the time, compared to 53.8% for all other wick lengths. Long-wick setups also experienced 54.0% greater adverse price movement and produced continuation only 41.7% of the time, suggesting that price rejection during the initial earnings reaction may reduce the quality of momentum trades.
Every momentum trader has looked at a strong earnings candle and wondered whether the stock closed with institutional conviction or whether buyers and sellers were already beginning to lose control.
But does a stock that closes near its hourly high or low actually reflect stronger institutional conviction than one that gives back several percentage points before the candle closes?
After all, traditional candlestick analysis suggests that long upper wicks represent selling pressure while long lower wicks represent buying pressure.
However, very little research has examined whether wick length has predictive value specifically after earnings announcements, when stocks often experience unusually high volatility and institutional participation.
To explore this question, I analyzed dozens of post-earnings momentum set ups from my proprietary dataset.
Rather than studying traditional candlestick patterns like hammers or shooting stars, I focused specifically on the amount of price rejection that occurred during the first hourly earnings candle and compared it against continuation rates, maximum favorable excursion, maximum adverse excursion, and profit-target hit rates.
Quick Answer: Does Wick Length Predict Momentum Continuation?
Yes, but probably not in the way many traders expect. Within my dataset, post-earnings set ups with long momentum-end wicks hit a +9% profit target just 25.0% of the time, compared to 53.8% for all other wick lengths, while also experiencing substantially greater adverse price movement and lower continuation rates. However, shorter wicks did not consistently outperform one another, with medium-length wicks producing the highest average maximum favorable excursion. Overall, the data suggests that extreme price rejection matters far more than minor price rejection when evaluating post-earnings momentum.
Key Statistics – Candlestick Structure & Wick Lengths
- Candlestick shadows (wicks) are generally interpreted as evidence of intraperiod buying or selling pressure.
- Academic evidence on standalone candlestick patterns is mixed, with most studies finding that individual candle patterns have limited predictive power unless combined with additional market context.
- Price continuation following earnings is instead largely explained by the Post-Earnings Announcement Drift (PEAD) anomaly, which documents that unexpected earnings information tends to be incorporated into prices gradually over time.
- Based on my proprietary trading research, long momentum-end wicks hit a +9% profit target only 25.0% of the time.
- All remaining wick categories combined hit a +9% profit target 53.8% of the time.
- Long momentum-end wicks experienced 8.38% average maximum adverse excursion, versus 5.44% for all shorter wick categories.
- Long momentum-end wicks continued only 41.7% of the time.
- Medium momentum-end wicks produced the highest average maximum favorable excursion (15.06%).
- Long momentum-end wicks still averaged 12.19% maximum favorable excursion, indicating that many eventually recovered despite poor trade quality.
Why Might Long Wicks Matter?
The first hourly candle after earnings are reported represents the market’s initial reaction to new information.
Ideally, a strong momentum move will close near its high (for bullish reactions) or near its low (for bearish reactions), suggesting buyers or sellers remained in control throughout the hour.
A long wick, however, indicates that a meaningful portion of that move was rejected before the candle closed, potentially reflecting profit-taking, increased liquidity from opposing traders, or a lack of institutional conviction.
Although there is no universally accepted definition of a “long” wick, many technical traders view retracements of 38.2%, 50%, and 61.8% of a move as important Fibonacci levels.
A wick that retraces roughly half (50%) or more of the original earnings move may therefore represent more significant price rejection than a candle that closes near its extreme.
The purpose of this study is not to prove that Fibonacci retracements predict post-earnings momentum, but rather to examine whether greater intrahour price rejection is associated with weaker momentum continuation.
How I Classified & Normalized Wick Length Data
To compare candlestick wicks across all of the post-earnings set ups in my current dataset, I first separated each candle into its top wick and bottom wick.
And, because this study includes both bullish and bearish earnings reactions, I then normalized each setup by focusing on the momentum-end wick. For bullish candles, this is the upper wick, while for bearish candles, it is the lower wick.
In both cases, the momentum-end wick represents the portion of the initial earnings move that was rejected before the hourly candle closed.
Rather than measuring the exact percentage retracement, each momentum-end wick was classified into one of five descriptive categories based on its relative size within the hourly candle:
- None: The candle closed at, or extremely close to, its high (bullish) or low (bearish), showing virtually no rejection.
- Very Short: Minimal price rejection before the hourly close.
- Short: A noticeable but relatively small retracement of the initial earnings move.
- Medium: A meaningful pullback that suggests moderate intrahour profit-taking or selling pressure.
- Long: A substantial retracement of the initial earnings move, often approaching or exceeding roughly half of the momentum move before the candle closed.
Although these classifications are subjective, they provide a consistent framework for comparing post-earnings momentum across dozens of setups.
Overall Profit Target Hit Rate Based on Wick Length
The clearest difference between wick categories appeared when measuring how often each setup reached a +9% profit target before falling 5% against the position.
Setups with no momentum-end wick hit the profit target 71.4% of the time, while medium-wick candles also performed strongly with a 66.7% hit rate.
However, performance declined sharply once the wick was classified as long.
Only 25.0% of long momentum-end wick setups reached the +9% target before triggering the -5% stop. By comparison, setups with no, very short, short, or medium wicks combined produced a 53.8% profit-target hit rate.
This suggests that substantial intrahour rejection may not eliminate the possibility of further favorable movement, but it makes the move considerably less reliable from a risk-management perspective.
| Momentum-End Wick | Setups | +9% TP Hit Rate |
|---|---|---|
| None | 7 | 71.4% |
| Very Short | 6 | 50.0% |
| Short | 24 | 41.7% |
| Medium | 15 | 66.7% |
| Long | 12 | 25.0% |
The results do not show a perfectly linear relationship where every increase in wick length produces worse performance.
Medium wicks actually outperformed both very short and short wicks, which may indicate that moderate profit-taking is not necessarily damaging to a strong post-earnings move.
The more meaningful dividing line appears to be extreme rejection: once the momentum-end wick became long, the probability of reaching the profit target dropped dramatically.
+9% Profit Target Hit Rate by Momentum-End Wick Length
Percentage of post-earnings set ups that reached a +9% profit target before triggering a -5% stop loss.
Source: Paper Trading Journal proprietary dataset of 65 post-earnings momentum set ups.
Maximum Favorable Excursion (MFE)
Maximum favorable excursion (MFE) measures the largest move in a trader’s favor after entering at the close of the first hourly earnings candle.
Unlike the above profit-target analysis, MFE ignores whether a stop loss would have been triggered first and simply measures the maximum opportunity each setup provided.
Interestingly, long momentum-end wicks did NOT produce the weakest MFE.
Despite hitting a +9% profit target only 25.0% of the time, long-wick setups still averaged a 12.19% maximum favorable excursion, comparable to the 11.80% average produced by all shorter wick categories combined.
Medium-length wicks generated the strongest average MFE at 15.06%.
Maximum Favorable Excursion (MFE) by Momentum-End Wick Length
Average maximum favorable excursion after entering at the close of the first hourly earnings candle.
This finding suggests that long momentum-end wicks do not necessarily eliminate post-earnings momentum. Instead, they appear to produce less efficient momentum.
Stocks with substantial price rejection frequently continued moving in the expected direction, but they also tended to experience larger pullbacks and greater intraday volatility, making it much more difficult for traders using disciplined stop losses to remain in the position long enough to capture those gains.
| Momentum-End Wick | Setups | Average MFE |
|---|---|---|
| None | 7 | 13.77% |
| Very Short | 6 | 9.17% |
| Short | 24 | 9.84% |
| Medium | 15 | 15.06% |
| Long | 12 | 12.19% |
Perhaps the most important takeaway is that MFE and profit-target hit rate tell two different stories.
While long momentum-end wicks produced respectable upside potential, they were significantly less likely to reach that potential before first triggering a disciplined stop loss.
For momentum traders, the issue appears to be execution rather than opportunity—the stock often still moved in the expected direction, but the path became considerably more volatile.
Maximum Adverse Excursion (MAE)
While maximum favorable excursion measures a trade’s upside potential, maximum adverse excursion (MAE) measures the largest move against the position before it reached its maximum profit.
For momentum traders, MAE provides a useful way to quantify the volatility and risk required to stay in a trade.
The results showed a clear increase in adverse price movement as momentum-end wick length increased.
| Momentum-End Wick | Setups | Average MAE |
|---|---|---|
| None | 7 | 3.27% |
| Very Short | 6 | 4.58% |
| Short | 24 | 5.98% |
| Medium | 15 | 5.92% |
| Long | 12 | 8.38% |
Setups with long momentum-end wicks experienced an average 8.38% maximum adverse excursion, compared to 5.44% for all other wick categories combined.
Maximum Adverse Excursion by Momentum-End Wick Length
Average maximum move against the position after entering at the close of the first hourly earnings candle.
Source: Paper Trading Journal proprietary dataset of 65 post-earnings momentum set ups.
In other words, traders entering long-wick setups had to withstand approximately 54.0% more adverse price movement before reaching their maximum favorable excursion.
This helps explain why long-wick setups still produced respectable maximum favorable excursions but poor profit-target hit rates. The opportunity often remained, but the larger pullbacks frequently stopped traders out before the move fully developed.
Rather than signaling failed momentum, long momentum-end wicks appear to identify setups with greater execution risk and less efficient price discovery.
Continuation Rate
Profit targets and maximum excursions measure trade performance, but continuation rate answers a simpler question: did the stock continue moving in the direction of the initial earnings reaction, or did it reverse?
This provides another way to evaluate whether the first hourly candle accurately reflected the market’s underlying conviction.
Once again, long momentum-end wicks produced the weakest results.
| Momentum-End Wick | Setups | Continuation Rate |
|---|---|---|
| None | 7 | 85.7% |
| Very Short | 6 | 66.7% |
| Short | 24 | 66.7% |
| Medium | 15 | 80.0% |
| Long | 12 | 41.7% |
Only 41.7% of long-wick setups continued moving in the direction of the original earnings reaction, compared to approximately 73.1% for all other wick categories combined.
While not every continuation ultimately reached a +9% profit target, stocks with shorter momentum-end wicks were considerably more likely to maintain their initial trend into the following trading session.
These findings reinforce the results from the previous sections.
Long momentum-end wicks did not eliminate future upside or downside potential, but they were associated with weaker trend persistence and greater intraday uncertainty.
In contrast, candles that closed closer to their highs or lows generally reflected stronger conviction and produced more reliable post-earnings momentum.
The Surprising Result
Before analyzing the data, I expected wick length to follow a simple pattern: the smaller the momentum-end wick, the stronger the post-earnings momentum.
In theory, candles that closed closest to their highs or lows should have reflected the strongest institutional conviction and produced the best performance.
Instead, the data told a more nuanced story.
Medium-length momentum-end wicks actually produced the highest average maximum favorable excursion (15.06%), while also delivering a 66.7% profit-target hit rate and an 80.0% continuation rate.
| Momentum-End Wick | Avg. MFE | +9% TP Hit Rate | Continuation Rate |
|---|---|---|---|
| None | 13.77% | 71.4% | 85.7% |
| Very Short | 9.17% | 50.0% | 66.7% |
| Short | 9.84% | 41.7% | 66.7% |
| Medium | 15.06% | 66.7% | 80.0% |
| Long | 12.19% | 25.0% | 41.7% |
Medium momentum-end wicks produced the highest average maximum favorable excursion while maintaining strong profit-target and continuation rates.
In contrast, very short and short wicks generally underperformed medium wicks across several metrics.
Interestingly, this finding also aligns with other research from my dataset. Previous studies found that 5-15% momentum moves outperform larger earnings reactions and that waiting for modest pullbacks toward the 9-hour EMA often produces better entries.
Together, these studies suggest that moderate retracements may be a normal part of healthy post-earnings price discovery rather than a sign of weakening momentum.
Actionable Insight – What This Means For Momentum Traders
While no single candlestick characteristic can predict future price action with certainty, this study suggests that the amount of price rejection during the first hourly earnings candle can provide valuable context when evaluating a post-earnings momentum setup.
Based on the current dataset, momentum traders may want to consider the following:
- Focus on probabilities, not predictions. Candlestick wicks should be viewed as one variable within a broader trading framework rather than a standalone buy or sell signal. The goal is not to eliminate risk, but to improve the odds of selecting higher-quality post-earnings momentum set ups.
- Give more weight to candles that close near their highs or lows. These setups generally produced higher continuation rates and smaller drawdowns than candles with substantial price rejection.
- Treat long momentum-end wicks as a caution flag, not a deal breaker. Long-wick setups still averaged a 12.19% maximum favorable excursion, but they were far less likely to reach a +9% profit target before triggering a -5% stop loss.
- Expect greater volatility when trading long-wick setups. These trades experienced 54.0% larger average drawdowns than all other wick categories combined, making disciplined risk management even more important.
- Don’t assume every pullback is bearish. Surprisingly, medium-length momentum-end wicks produced the strongest average maximum favorable excursion in this study, suggesting that modest intrahour profit-taking may simply be part of healthy price discovery.
- Evaluate wick length alongside other technical and fundamental factors. A small wick alone does not guarantee continuation, but when combined with strong earnings, bullish guidance, and multiple timeframe breakouts, it may help identify higher-quality momentum setups.
Conclusion – Candlestick Wick Statistics
Perhaps the most important takeaway from all of this is that, instead of treating all wicks equally, momentum traders may benefit from viewing extreme price rejection as a warning sign, but not a reason NOT to trade the setup.
While additional data will help refine these findings, the results suggest that the first hourly earnings candle contains more information than many traders may realize.
Rather than focusing on the size of the earnings move or wick structure, traders should also consider how the move developed, which includes analyzing EPS and revenue metrics, breakout confluence, and whether there are any other variables that can influence the probability of continuation.
As the Paper Trading Journal dataset continues to grow, I’ll continue testing whether candlestick characteristics like wick length can help identify the highest-quality post-earnings momentum set ups.
If you want to go deeper:
- Explore the Trading Statistics Hub to understand how different sectors behave across market cycles
- Study real setups inside the Trade Reviews section
- Learn the framework behind high-probability setups in the Post-Earnings Momentum Strategy
This is how you turn raw market data into repeatable trading edge.
More Trading Statistics…
Frequently Asked Questions About Candlesticks & Wick Structure
What is a candlestick wick?
A candlestick wick, also called a shadow, is the portion of a candlestick that extends above or below the candle’s body. The upper wick represents the highest price reached during the period, while the lower wick represents the lowest price. Wicks illustrate how much prices moved beyond the opening and closing prices before reversing.
What is a momentum-end wick?
A momentum-end wick is the wick that forms in the direction of the initial earnings move. For bullish earnings reactions, this is the upper wick because it represents price rejection near the session high. For bearish earnings reactions, it is the lower wick, representing rejection near the session low. This study focused on momentum-end wicks because they measure how much of the initial earnings move was rejected before the first hourly candle closed.
Do long candlestick wicks predict weaker post-earnings momentum?
Based on my dataset, yes, but not because they eliminate opportunity. Long momentum-end wicks were associated with lower continuation rates, larger drawdowns, and fewer +9% profit-target hits than shorter wick categories. However, they still produced respectable maximum favorable excursions, indicating that the opportunity often remained despite becoming more difficult to trade.
Do long upper wicks always mean a stock will reverse after earnings?
No. A long upper wick simply indicates that buyers were unable to maintain the session high before the candle closed. In this study, many long-wick setups still continued moving in the expected direction, but they experienced greater volatility and were significantly less likely to reach a +9% profit target before triggering a -5% stop loss.
Are candlestick wicks reliable trading signals by themselves?
Probably not. Most academic research suggests that individual candlestick patterns have limited predictive value on their own. They become much more useful when combined with other information such as earnings surprises, forward guidance, trading volume, and support or resistance levels. Wick length should therefore be viewed as one variable within a broader trading framework rather than a standalone buy or sell signal.
Should traders avoid earnings setups with long wicks?
Not necessarily. The data does not support automatically rejecting long-wick setups. Instead, traders should recognize that these setups historically experienced larger drawdowns and lower continuation rates, making disciplined risk management even more important.
What was the biggest surprise from this study?
Contrary to expectations, medium-length momentum-end wicks produced the strongest average maximum favorable excursion in the dataset. This suggests that a modest amount of intrahour profit-taking may be a normal part of healthy post-earnings price discovery rather than an immediate warning sign.
Why didn’t the smallest wicks produce the best results?
One possible explanation is that moderate profit-taking is healthy during strong earnings reactions. A small pullback may simply reflect traders locking in gains before the primary trend resumes. However, because the current dataset contains only 65 post-earnings set ups, additional research is needed to determine whether this relationship persists as more observations are added.
Does wick length matter more than earnings fundamentals?
No. Throughout my research, earnings fundamentals and technical confirmation remain the most important variables influencing post-earnings momentum. Wick length appears to provide additional context about trade quality and execution risk, but it should not override factors such as earnings surprises, revenue growth, forward guidance, or multi-timeframe technical breakouts.
How many post-earnings setups were included in this study?
This analysis examined 65 post-earnings momentum set ups collected in the Paper Trading Journal database. Each setup was classified by momentum-end wick length and evaluated using continuation rate, maximum favorable excursion (MFE), maximum adverse excursion (MAE), and whether a +9% profit target was reached before a -5% stop loss.
References
Brock, W., Lakonishok, J., & LeBaron, B. (1992). Simple technical trading rules and the stochastic properties of stock returns. The Journal of Finance, 47(5), 1731-1764. https://doi.org/10.1111/j.1540-6261.1992.tb04681.x
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383-417. https://doi.org/10.2307/2325486
Marshall, B. R., Young, M. R., & Rose, L. C. (2006). Candlestick technical trading strategies: Can they create value for investors? Journal of Banking & Finance, 30(8), 2303-2323. https://doi.org/10.1016/j.jbankfin.2005.08.001
Paper Trading Journal. (2026). Proprietary post-earnings momentum dataset (65 post-earnings set ups). Internal research database.
Park, C.-H., & Irwin, S. H. (2007). What do we know about the profitability of technical analysis? Journal of Economic Surveys, 21(4), 786-826. https://doi.org/10.1111/j.1467-6419.2007.00519.x
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