Bullish Stick Sandwich Pattern – Formation, Trading Ideas & More
Bullish Stick Sandwich Pattern: Technical analysts use charts and candlestick patterns to analyze stock prices and predict future movements. Each pattern formed in the market has a reason for its formation and provides signs.
There are several important patterns that led to certain movements in the price after their formation. In this article, we will learn about a pattern called the Bullish Stitch Sandwich Pattern.
What is a Bullish Stick Sandwich Pattern?
The stick sandwich pattern is a three candlestick pattern that indicates a possible reversal. In this pattern, the center candle is the opposite color of the two candles on either side.
The bullish stick sandwich pattern is a bullish reversal pattern where the middle candle is a green candle and the other two candles are red candles. The third candle must also close near the closing price of the first candle. gulp down middle candle.
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In that situation, it is desirable for this pattern to appear in a downtrend as the accuracy of the indication increases.
Bullish Stick Sandwich Pattern – Formation
For a three candlestick pattern to be called a bullish stick sandwich pattern, three conditions must be met:
Condition 1- The previous trend before this pattern was formed should have been a bearish/downtrend.
Condition 2- The middle candle should be bullish (green candle) and the outer two candles should be bearish (red candles).
Condition 3- The third candle should engulf the middle candle and close at or near the close of the first candle.
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Bullish Stick Sandwich Pattern – Psychology
In a bear market, sellers control the market, so the first candle is red. However, the formation of a green candle indicates that selling pressure may be waning and more buyers may enter the market.
The third candle (red candle) then closes at or near the close of the first candle, indicating that the price has strong support at that price. So the market may find support at that level and potentially move higher.
Bullish Stick Sandwich Pattern – Trading Ideas
The previous trend before this pattern was formed should have been down. Once a downtrend is formed, traders can place a trade as follows:
- entry- If the stock price begins to trade above the opening price of the third candle of the Bullish Stick Sandwich pattern, traders can take a long position.
- Profit target- If the price reaches an immediate resistance 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 below the low point of the pattern.
Does a Bullish Stick Sandwich always exhibit bullish movement?
The bullish stick sandwich pattern is not one of the candlestick patterns that appears often. Traders may misinterpret this pattern as a bearish trend, indicating a downward movement in price. Therefore, the two closing prices of the red candles formed as support should be interpreted as the price failed to break below this level during the formation of the pattern.
Additionally, it is important to note that this pattern does not imply a complete trend reversal, but only a brief upward movement.
Bullish Stick Sandwich Pattern – Example
In the HDFC BANK 1-day chart above, we can see a bullish stick sandwich pattern forming. We can observe that this pattern formed after a. downtrend And after its appearance, the stock price rose, as discussed in this article.
When this pattern was formed, traders could have taken a long position at Rs. 27.5 and stop loss was Rs.26.3.
Bullish Stick Sandwich Pattern – Key Features
- A bullish stick sandwich pattern is formed in a downtrend.
- It consists of three candles, the middle candle is green and the other two are red.
- The closing prices of the first and third candles are near the same price range.
- The third candle engulfs the second green candle.
- The formation of this pattern indicates that selling pressure has weakened.
- The closing price of the first and third candles acts as a support zone where the price can gain support and rise.
- The formation of this pattern indicates a brief upward movement in price.
Read more: Hanging Man Candlestick Pattern
conclusion
In this article, we discussed the bullish stick sandwich pattern, which is a short-term bullish 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 thoughts on this article? Let us know in the comments section below.
Written by Praneeth Kadagi
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