Trend trading is one of the most profitable trading strategies. You must have heard the repeated quote that Trend is your friend. But the trend can only be your friend if you know how it will behave in the future. If you don’t know that the trend will reverse soon, you will end up with a big loss. The candlestick chart is one of the ways to predict the future of a trend, whether it will reverse in the near future or continue for some time. Bullish Necklines is a candlestick pattern that can help you know if the trend continues or not. It is a trend confirmation pattern. There are types of neckline patterns; one is the In Neck and the other is the Out Neck Pattern.
The candlestick formed on the setup day should be a long bullish candlestick showing a lot of buying. On the signal day, a bearish candle forms, either long or short, with its closing price very close to the close of the setup day.
If the closing price of the second day is very close to the closing price of the first day, the formed neckline candlestick pattern is known as a neckline pattern. If the closing price on the setup day is slightly lower than the closing price on the second day, it is known as a neckline pattern.
There is not much difference, but nevertheless you should know this difference. Both the neck and neck pattern tell the same story, so even if you can’t tell the difference between them, there’s not much difference. When this pattern appears in an uptrend, it means that the uptrend will continue in the future.
Now, let’s talk about a trend reversal candlestick pattern; The bearish meeting line. On the first day or what you call the setup day, you will find a long bullish candle. On the second day or what you call the day of the sign, you will find a breach opening up. This gap entices vendors to start selling and continues throughout the day. This will result in a long bearish candlestick on the second or what you call the day of the signal. This long bearish candlestick should have a close very close to the open of the day’s low, as well as the close should be very close to the close of the first day or what you call the setup day. This is a bearish meeting line trend reversal pattern. What it means is that the trend is about to reverse soon!
Another trend reversal pattern is the Bearish Piercing Ling pattern. This candlestick pattern is formed when on the first day or the setup day, a long bullish candle forms, meaning that the bulls have been in control of the market all day. On the second day or what you call the signal day, a bearish candle will form. This bearish candle should open above the high of the first day. This means that on the second day or what you call the signal day, the sellers started to sell by pushing the price action past the opening price to the midpoint of the first day candle.
This is a trend reversal pattern that usually occurs in the later stages of an uptrend. The price continues to rise but has lost its momentum. Now, as a trader, when he combines these Japanese candlestick patterns with technical indicators, he gets a powerful tool in his arsenal.