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Thursday, October 29, 2009

In Neck and On Neck Candlestick Patterns

Both In Neck and On Neck are bearish trend continuation candlestick patterns indicating a continuation of an existing bearish trend, after a bullish day. Both are two candlestick formations, comprising a long bearish and (preferably) a short bullish candlestick.


The requirements of In Neck and On Neck candlestick patterns include:
  • The pattern should form in a significant downtrend.
  • The first day is a long bearish day comprising a long black or colored candlestick.
  • The second day is a bullish day where prices open a gap below the first day's closing.
  • For In Neck pattern: the second day candlestick closes at or just (barely) above the first day's closing. If the candlestick closes way above the first day's closing, it forms Bullish Piercing Line pattern, a reliable bullish reversal formation.
  • For On Neck pattern: the second day candlestick closes below the first day's closing. The candlestick needs to be short; if it is long, it may form Bullish Meeting Lines pattern.
Both In Neck and On Neck candlestick formations occur commonly in downtrends and are considered undeveloped versions of bullish piercing line pattern. As bulls are failing to close trades distinctly above the first day's close, the downtrend is expected to continue, at least for a short term.

Both In Neck and On Neck are moderately reliable candlestick patterns. The bearishness of the formation increases with increase in length of the first day bearish candlestick. Confirmation of trend continuation is recommended.

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posted by NobleTrading at 9:58 AM

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