The kangaroo tail is an extremely powerful catalyst. It is an obvious clue to the naked trader that the market has gone too far. There are many traders around the world who simply trade this one simple yet powerful trading setup.
A kangaroo tail is a distinct price pattern. It is one candlestick that is easy to spot. Once you become familiar with this catalyst you will see them everywhere and often at reversal points. Kangaroo tails may print buy signals—bullish kangaroo tails—and bearish kangaroo tails, which are sell signals. The kangaroo tail has two parts: the kangaroo body and the kangaroo tail. All kangaroo tails are single-candlestick formations.
Ideally, the kangaroo tail is much longer than the body of the kangaroo.The best kangaroo tails have very long tails such as the kangaroo tail
in Figure 8.1.
FIGURE 8.1 This kangaroo tail on the AUD/USD daily chart is an ideal kangaroo tail because the tail is much longer than the body.
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The long tail suggests that the market has extended too far into a zone and is likely to reverse. There are other characteristics unique to the kangaroo tail, and all kangaroo tails must maintain all these characteristics. If you see a price pattern that does not include all these characteristics, it may be a very interesting price pattern, but it will not be a kangaroo tail.