Bearish Stick Sandwich Pattern – Psychology and Trading Ideas
Bearish Stick Sandwich Pattern: Technical analysts rely heavily on charts and candlestick patterns to thoroughly analyze stock prices and accurately predict future movements. Each pattern formed in the market has a clear and legitimate reason behind its formation and provides a strong indicator of market direction.
Several important patterns result in significant price movements after their formation and are essential to the analysis process. In this article, we will learn about a pattern called the bearish stick sandwich pattern.
What is a Bearish Stick Sandwich Pattern?
The bearish stick sandwich pattern is a three candlestick pattern that indicates a potential reversal. In this pattern, the center candle is the opposite color of the two candles on either side.
The bearish stick sandwich pattern is a bearish reversal pattern where the middle candle is red and the other two candles are green. Additionally, in this pattern, the closing prices of the first and last candles should be close to the same level.
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Moreover, the third candle in this pattern should engulf the red candle in the middle. In that situation, it is desirable for this pattern to appear as an upward trend as the accuracy of the indication increases.
Bearish Stick Sandwich Pattern – Formation
For a three candlestick pattern to be called a bearish stick sandwich pattern, three conditions must be met:
Condition 1- The previous trend before this pattern was formed must have been an uptrend.
Condition 2- The middle candle should be bearish (red candle), while the other two candles should be bullish (green candles).
Condition 3- The third candle should engulf the middle candle and close at approximately the same price as the first candle.
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Bearish Stick Sandwich Pattern – Psychology
in bull market, buyers are in control of the market, so the first candle is green. The formation of a second red candle means that buying pressure is weak, which could potentially mean sellers entering the market.
However, if the third candle (green candle) closes near the same price as the first candle, it indicates that there is resistance at that price. Therefore, it is more likely that the price will be rejected and fall.
Bearish Stick Sandwich Pattern – Trading Ideas
The previous trend before this pattern was formed must have been up. Once an uptrend has formed, traders can place trades as follows:
- entry- If the price of a security falls below the opening price of the last candle of the pattern, a trader can take a sell position.
- target- Once the price reaches the immediate support zone, traders can exit the trade. Once this level is reached, you can also book a partial profit on the trade and hold the remaining position until the next support level.
- Stop Loss – Traders should set a stop loss just above the high price of the pattern.
Does a Bearish Stick Sandwich always indicate a Bearish move?
The bearish stick sandwich pattern is not one of the candlestick patterns that appears often. It is possible for traders to misinterpret this pattern as a bullish rise, indicating an upward movement in price.
Therefore, the two green candles should be interpreted as forming a resistance zone as the price was unable to move above this level while the pattern was forming. Furthermore, it is important to note that this pattern does not imply a complete trend reversal, but only a brief downward movement.
Bearish Stick Sandwich Pattern – Example
On the NIFTY BANK 15-minute chart above, we can observe the formation of a bearish stick sandwich pattern. It appears after an uptrend and after its formation you can see the price fall.
You can also see that the closing prices of the first candle and the last candle are almost the same, and the last candle also engulfs the middle candle. When this pattern was formed, the trader could enter a sell entry at Rs.44629.20 and the stop loss was Rs. 44670.20
Bearish Stick Sandwich Pattern – Key Features
- The bearish stick sandwich pattern is formed in an uptrend.
- It consists of three candles, the middle candle is red and the other two are green candles.
- The closing prices of the first and last candles are almost the same price.
- The third candle engulfs the red candle in the middle.
- The formation of this pattern indicates weak buying momentum.
- The closing prices of the first and last candles play the following roles: resistance Areas where prices may be rejected.
Read more: Hanging Man Candlestick Pattern
conclusion
In this article, we discussed the bearish stick sandwich pattern, which is a short-term bearish movement indicator pattern. I understood how and why to identify patterns, how to trade based on them, and what precautions to take when analyzing and executing trades.
Traders should not just trade based on this pattern, they should also use other indicators before placing a trade. Setting a stop loss is necessary because it minimizes losses if the market moves against our analysis. What are your views on this pattern? Let us know through the comments section.
Written by Praneeth Kadagi
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