The Synapse Network

Falling Three Methods

The “Falling Three Methods” is a bearish, five-candle continuation pattern that signals an interruption of a current downtrend but not a reversal.

This pattern is characterized by two long candlesticks in the direction of the trend—down—at the beginning and end, with three shorter counter-trend candlesticks appearing in the middle.

This pattern contrasts with the Rising Three Methods, which signals a continuation of an uptrend.

Understanding the Falling Three Methods Pattern

The Falling Three Methods pattern occurs when a downtrend stalls as bears lack the impetus or conviction to keep pushing a security’s price lower.

This leads to a counter-move often resulting from profit-taking or an attempt by eager bulls anticipating a reversal.

The subsequent failure to make new highs or close above the opening price of the initial long-down candle emboldens bears to re-engage, leading to a resumption of the downtrend.

The Falling Three Methods pattern forms when the five candlesticks meet the following criteria:

The first candlestick in the pattern is a long bearish candlestick within a defined downtrend.

It is followed by three ascending small-bodied candlesticks that trade below the open or high price and above the close or low price of the first candlestick.

The fifth and final candlestick is a long bearish one that pierces the lows established by the first candlestick, indicating that the bears have regained control.

The series of small-bodied candlesticks in the middle of the Falling Three Methods pattern represents a period of consolidation before the downtrend resumes.

These small-bodied candlesticks are ideally bullish, especially the second one, although this is not a strict requirement.

This pattern is important because it shows traders that the bulls still don’t have enough conviction to reverse the trend.

Active traders often use it as a signal to initiate new short positions or add to their existing short positions.

The pattern’s bullish equivalent is the Rising Three Methods.

Trading the Falling Three Methods

The Falling Three Methods pattern provides traders with a pause in the downtrend to initiate a new short position or add to an existing one.

A trade can be taken on the close of the final candlestick in the pattern.

Conservative traders may want to wait for other indicators to confirm the pattern and enter on a close below the final candle.

Traders should ensure that the pattern isn’t sitting above a key support level, such as being located just above a major trend line, a round number, or horizontal price support.

It’s prudent for traders to check other time frames to confirm that the downtrend has ample room to continue.

Related Concepts

What Are the Rising Three Methods?

The Rising Three Methods is another candlestick pattern that indicates a trend is likely to continue rather than reverse or hesitate.

Like the Falling Three Methods, it is composed of a series of candles but has opposite implications.

What Is a Moving Average?

A moving average helps to identify the direction of a trend by monitoring information over a period of time and dividing the resulting number to pinpoint an average.

It is recalculated on an ongoing basis.

What Do Bearish and Bullish Mean?

A bear market results from falling stock prices, while a bull market occurs when prices are steadily and incrementally increasing.

Bull markets tend to occur in a healthy economy, while bear markets often result from a sustained period of economic decline.

Concluding Thoughts

The Falling Three Methods pattern offers traders several options for placing suitable stop-loss orders.

Aggressive traders may want to set a stop above the fifth candle in the pattern.

Traders who want to give their position more flexibility can place a stop above the third small countertrend candle or the high of the first long bearish candle in the pattern.

Before taking a trade, traders should check that there are no major support levels on the daily and weekly charts, especially if the pattern forms on the 60-minute chart.

While this pattern can provide valuable insights into market behavior, it should be used in conjunction with other technical indicators and risk management strategies to optimize trading outcomes.

0 Comments/by
The Synapse Network

Rising Three Methods

The “Rising Three Methods” is a bullish continuation candlestick pattern that occurs within an uptrend and signals the resumption of that trend.

This pattern is characterized by a series of candlesticks that indicate a temporary consolidation before the uptrend continues.

It can be contrasted with the “Falling Three Methods” pattern, which signals a continuation of a downtrend.

Understanding the Rising Three Methods Pattern

The Rising Three Methods pattern forms when a security’s price action meets the following characteristics:

The first bar of the pattern is a bullish candlestick with a large real body within a well-defined uptrend.

Subsequent candlesticks are typically three consecutive bearish small-bodied candlesticks that trade above the low and below the high of the first candlestick.

The last bar is another bullish candlestick with a large real body that breaches the high and closes above the high and close established by the first candlestick, suggesting that the bulls are back in control of the security’s direction.

The bulls are initially in firm control, but they pause to see if there is enough conviction in the trend.

The series of small-bodied candlesticks contained between the first and fifth candles in the Rising Three Methods pattern is regarded as a period of consolidation before the uptrend resumes.

The decisive fifth bullish candle proves that sellers did not have enough conviction to reverse the prior uptrend and that buyers have regained control of the market.

Active traders may use the pattern as a signal to add to their long positions.

Similar chart formations that do not meet the exact characteristics of the pattern can still help traders identify good entry points in a trending market.

For example, there may be four or five small-bodied candles instead of three within the pattern.

The Rising Three Methods pattern is the opposite of the Falling Three Methods pattern.

As with other forms of technical analysis, chart reading is based on the assumption that markets will continue to follow the patterns established by earlier trading cycles.

However, past performance is no guarantee of future results, and chart patterns may produce false positives.

How to Trade the Rising Three Methods Pattern

Entry

Traders can enter the market when the final bar in the pattern closes.

Alternatively, a trade could be taken when the price moves above the high of the final candle.

Aggressive traders may look for an entry before the final bar closes but must be prepared to exit if the fifth bar fails to complete the pattern.

Traders should ensure that the Rising Three Methods pattern is not located beneath key resistance levels to confirm that the uptrend has sufficient room to continue.

For instance, a trendline or widely used moving average slightly above the pattern could limit further gains.

Resistance levels should be checked on longer-term charts to increase the probability of a successful trade.

The Rising Three Methods pattern may be more effective if the initial bullish candlestick’s wicks, denoting the high and low traded prices for that period, are shallow and if it forms above a whole number.

Risk Management

Aggressive traders could place a stop-loss order below the low of the final bar in the pattern or under the second small-bodied candle, depending on their risk tolerance.

Traders who want to give their trade some room to move might place a stop order below the first bullish candle or under a recent swing low.

How Do You Spot a Rising Three Methods Pattern?

A Rising Three Methods pattern consists of a large green candle, followed by three smaller red candles, and a final green candle that closes above the high set by the first candle.

This indicates that after a period of consolidation, the market is largely dominated by buyers who will likely continue to drive prices higher.

The Rising Three Methods pattern must occur after a general uptrend, as indicated by simple moving averages or other metrics.

How Do You Identify a Falling Three Methods Pattern?

A Falling Three Methods pattern is a bearish pattern that resembles a mirror image of the Rising Three Methods.

It consists of five candles following a general downtrend: a large red candle, followed by three small green candles, and a final red candle that closes below the bottom set by the first candle.

This indicates that after a short period of uncertainty, the market is dominated by sellers who will continue to drive prices lower.

What Does the Three Methods Pattern Tell You?

Both types of Three Methods patterns indicate a resumed trend after a brief period of interruption.

Following a sharp price move, there is a period of retracement where buyers and sellers consolidate their positions.

A following price move indicates that the trend has resumed.

Concluding Thoughts

The Rising Three Methods pattern is a valuable tool for technical traders seeking to identify bullish trends within an uptrend.

However, like all chart patterns, it should not be relied upon in isolation.

Traders are encouraged to use additional technical indicators and risk management strategies to confirm the pattern’s validity and to optimize their trading outcomes.

While this pattern can provide insights into market behavior, it is essential to remember that no pattern guarantees future performance, and careful analysis is always required.

0 Comments/by
The Synapse Network

Three Black Crows

Three black crows is a phrase used to describe a bearish candlestick pattern that may predict the reversal of an uptrend.

Candlestick charts show the day’s opening, high, low, and closing prices for a particular security.

For stocks moving higher, the candlestick is white or green.

When moving lower, they are black or red.

The black crow pattern consists of three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle.

Often, traders use this indicator in conjunction with other technical indicators or chart patterns as confirmation of a reversal.

Three Black Crows Explained

Three black crows are a visual pattern, meaning that there are no particular calculations to worry about when identifying this indicator.

The three black crows pattern occurs when bears overtake the bulls during three consecutive trading sessions.

The pattern shows on the pricing charts as three bearish long-bodied candlesticks with short or no shadows or wicks.

In a typical appearance of three black crows, the bulls will start the session with the price opening modestly higher than the previous close, but the price is pushed lower throughout the session.

In the end, the price will close near the session low under pressure from the bears.

This trading action will result in a very short or nonexistent shadow.

Traders often interpret this downward pressure sustained over three sessions to be the start of a bearish downtrend.

Example of How to Use Three Black Crows

As a visual pattern, it’s best to use three black crows as a sign to seek confirmation from other technical indicators.

The three black crows pattern and the confidence a trader can put into it depends a lot on how well-formed the pattern appears.

The three black crows should ideally be relatively long-bodied bearish candlesticks that close at or near the low price for the period.

In other words, the candlesticks should have long, real bodies and short, or nonexistent, shadows.

If the shadows are stretching out, then it may simply indicate a minor shift in momentum between the bulls and bears before the uptrend reasserts itself.

Volume can make the three black crows pattern more accurate.

Volume during the uptrend leading up to the pattern is relatively low, while the three-day black crow pattern comes with relatively high volume during the sessions.

In this scenario, the uptrend was established by a small group of bulls and then reversed by a larger group of bears.

Of course, with markets being what they are that could also mean a large number of small bullish traders running into a smaller group of large-volume bearish trades.

The actual number of market participants matters less than the volume each is bringing to the table.

Three Black Crows vs. Three White Soldiers

The opposite of the three black crows pattern is the three white soldiers pattern, which occurs at the end of a bearish downtrend and predicts a potential reversal higher.

This pattern appears as three long-bodied white candlesticks with short, or ideally nonexistent, shadows.

The open occurs within the previous candlestick’s real body, and the close occurs above the previous candlestick’s close.

Three white soldiers are simply a visual pattern indicating the reversal of a downtrend whereas three black crows indicate the reversal of an uptrend.

The same caveats apply to both patterns regarding volume and confirmation from other indicators.

Limitations of Using Three Black Crows

If the three black crows pattern involves a significant move lower, traders should be wary of oversold conditions that could lead to consolidation before a further move lower.

The best way to assess the oversold nature of a stock or other asset is by looking at technical indicators, such as the relative strength index (RSI), where a reading below 30.0 indicates oversold conditions, or the stochastic oscillator indicator that shows the momentum of movement.

Many traders typically look at other chart patterns or technical indicators to confirm a breakdown, rather than using the three black crows pattern exclusively.

As a visual pattern, it is open to some interpretation such as what is an appropriately short shadow.

Also, other indicators will mirror a true three black crows pattern.

For example, a three black crows pattern may involve a breakdown from key support levels, which could independently predict the beginning of an intermediate-term downtrend.

The use of additional patterns and indicators increases the likelihood of a successful trade or exit strategy.

Real-World Example of Three Black Crows

In the third week of May 2018, a three black crows pattern appeared on the GBP/USD weekly price chart, representing an ominous sign for the currency pairing.

Analysts speculated that the three black crows pattern indicated that the pairing would continue to trend low.

Three factors were analyzed to determine that the three black crows pattern signaled a continuing downturn:

The relatively steep upward trend of the bullish market.

The low wicks of each candle, indicating a small difference between the close and the week’s low.

The fact that, while the candles did not gradually elongate, the longest candle was the third day.

Concluding Thoughts

The three black crows pattern is a potent bearish indicator that often signals a reversal of an uptrend.

However, like all visual patterns, it should be used in conjunction with other technical indicators and volume data to ensure accuracy.

While it can provide valuable insights, traders should be cautious of false signals and consider the broader market context before making trading decisions.

This pattern is best employed as part of a comprehensive trading strategy, incorporating multiple forms of technical analysis to maximize its effectiveness.

0 Comments/by
The Synapse Network

Three White Soldiers

What Do Three White Soldiers Mean?

Three white soldiers is a bullish candlestick pattern that is used to predict the reversal of the current downtrend in a pricing chart.

The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle’s real body and a close that exceeds the previous candle’s high.

These candlesticks should not have very long shadows and ideally open within the real body of the preceding candle in the pattern.

What Do Three White Soldiers Tell You?

The three white soldiers candlestick pattern is typically observed as a reversal indicator, often appearing after a period of price decline.

This chart pattern suggests a strong change in market sentiment in terms of the stock, commodity, or forex pair making up the price action on the chart.

When a bullish candle closes with small or no shadows, it suggests that the bulls have managed to keep the price at the top of the range for the session.

Basically, the bulls take over the rally all session and close near the high of the day for three consecutive sessions.

In addition, the pattern may be preceded by other candlestick patterns suggestive of a reversal, such as a doji or a hammer.

Example of How to Trade Three White Soldiers

Because three white soldiers is a bullish visual pattern, it is used as a potential entry or exit point for a trade.

Traders who are short on the security look to exit and traders who are waiting to take a bullish position see the three white soldiers as an entry opportunity.

When trading the three white soldiers pattern, it’s important to note that the strong moves higher could create temporary overbought conditions.

The relative strength index (RSI), for example, may have moved above 70.0 levels.

In some cases, there is a short period of consolidation following the three white soldiers pattern, but the short- and intermediate-term bias remains bullish.

The significant move higher could also reach key resistance levels where the stock could experience a period of consolidation before continuing to move higher.

The Difference Between Three White Soldiers and Three Black Crows

The opposite of the three white soldiers is the three black crows candlestick pattern.

Three black crows consist of three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle.

Whereas three white soldiers catch the momentum shift from the bears to the bulls, three black crows show the bears taking control from the bulls.

The same caveats about volume and additional confirmation apply to both patterns, though confirming volume is more important in the bullish pattern.

Limitations of Using Three White Soldiers

Three white soldiers can also appear during periods of consolidation, which is an easy way to get trapped in a continuation of the existing trend rather than a reversal.

One of the key things to watch is the volume supporting the formation of three white soldiers.

Any pattern on low volume is suspect because it is the market action of the few rather than the many.

To combat the limitation of visual patterns, traders use the three white soldiers and other such candlestick patterns in conjunction with other technical indicators like trendlines, moving averages, and bands.

For example, traders may look for areas of upcoming resistance before initiating a long position or look at the level of volume on the breakout to confirm that there was a high amount of dollar volume during the move.

If the pattern occurred on low volume with near-term resistance, traders should wait until there is further confirmation of a breakout to initiate a long position.

Similar Chart Patterns

Several other chart patterns bear similarities to the three white soldiers, each with its own nuances and predictive capabilities.

Some of these include the three black crows, the bullish engulfing pattern, morning star, hammer and inverted hammer, the piercing line, the abandoned baby, tweezer bottoms and tops as well as the double bottom and double top.

Improving the Reliability of the Three White Soldiers Chart Pattern

Improving the reliability of the three white soldiers chart pattern involves a multi-faceted approach that incorporates additional technical indicators, volume analysis, and contextual market conditions.

The Best Assets to Trade with the Three White Soldiers Chart Pattern

The three white soldiers chart pattern is a versatile technical indicator that could be applied across various asset classes.

However, its effectiveness may vary depending on the asset’s liquidity, volatility, and market conditions.

Some asset classes where this pattern is commonly used are stocks, forex, commodities, ETFs, futures, and options.

The Best Timeframe to Use the Three White Soldiers Chart Pattern

The effectiveness of the three white soldiers chart pattern can vary depending on the timeframe used for analysis.

The best timeframe largely depends on the trader’s style and risk tolerance.

Generally, the three white soldiers pattern is often considered more reliable on longer timeframes such as the daily or weekly charts.

Indicators to Use in Conjunction With the Three White Soldiers Chart Pattern

Using additional technical indicators alongside the three white soldiers chart pattern has the potential to enhance its reliability and provide a more comprehensive trading strategy.

Some commonly used indicators that complement this pattern are the Relative Strength Index (RSI), moving averages, Bollinger Bands, Volume Oscillator, Moving Average Convergence Divergence (MACD), Stochastic Oscillators, Fibonacci Retracement Levels, the Average Directional Index (ADX), the Ichimoku Cloud, and Pivot Points.

Concluding Thoughts

The three white soldiers pattern serves as a strong bullish indicator, often signaling a reversal in a downtrend.

However, traders should exercise caution and corroborate this pattern with other technical indicators and volume data to avoid false signals.

It’s not a standalone tool but can be highly effective when used in conjunction with other technical analysis methods.

0 Comments/by
The Synapse Network

White Marubozu & Black Marubozu Pattern

The Marubozu candlestick is a lesser-known pattern among crypto traders, as it’s rare to find it on trading charts.

However, Marubozu formations are easy to identify once you know what to look for.

Once the Marubozu pattern is spotted, you can determine how effective its signal may be based on the pattern’s location within a larger trend.

While not occurring frequently, Marubozu patterns can be found on any chart time frame for any cryptocurrency.

In this article, we’ll discuss what the Marubozu candlestick pattern looks like and how to trade it once you’ve spotted it.

We’ll also review other indicators you can use to confirm a Marubozu pattern, and what limitations exist for trading it.

What Is the Marubozu Candlestick Pattern?

A one-candle pattern, the Marubozu candles look like a rectangular block because it has no wicks (or upper and lower shadows).

marubozu

It is a technical indicator used to predict the future direction of an asset’s price.

The pattern can be colored either red (bearish) or green (bullish, sometimes colored black).

Candlestick patterns and interpretations originated in Japan in the 18th century.

Marubozu is a Japanese word meaning “bald” or “shaved head” — which makes sense, as the pattern is missing a wick to the topside.

The Marubozu pattern is simple and straightforward, though many experienced traders may not have heard of it.

Its lack of popularity among traders may have more to do with its rarity than its actual utility.

The message behind the Marubozu pattern is simple: prices that trade strongly in one direction can often lead to a continuation and follow-through.

Three Key Locations for the Marubozu Pattern in a Trend

There are three different places within a larger trend where the Marubozu pattern may form:

– At the beginning or kickoff of a new trend
– During the middle of a trend
– As a blow-off to a mature trend about to reverse

Marubozu at the Kickoff of a New Trend

There are times when a trend reverses slowly in an almost stealth-like manner.

At such times, an important news announcement may add fuel to the new trend as prices move strongly in one direction.

In a case like this, a Marubozu candlestick pattern may be found early in the new trend.

Marubozu Pattern in the Middle of a Trend

In technical analysis, as a trend reverses, a battle may be waged in which the followers of the old trend are still hopeful it will continue.

At the same time, traders who believe a new trend has started cast their vote via their trades.

Initially, there’s a struggle, and then a flashpoint appears when the new trend breaks out.

During this breakout, the old trend’s followers have relinquished control.

Everyone is on board with the new trend.

Because the supply of buyers and sellers is lopsided, the trend takes off with strength.

Marubozu candle patterns are frequently found during the middle of market trends.

A Blow-off Top may House a Marubozu Pattern

A blow-off top is the end of a mature rally, with price appreciation accelerating in a last gasp of fear of missing out (FOMO).

By the end of the trend, the whales have exited, and the market reverses course shortly thereafter.

What Does a Marubozu Candle Pattern Look Like?

A Japanese candlestick generally has two portions to its formation: the body and the wicks, also called shadows.

The body is the colored portion of the candlestick.

Most charting packages use red or green coloring, though sometimes blue/red and black/white are other popular combinations.

Protruding from either end of the body is a small stick called the wick or shadow.

What makes the Marubozu formation unique is that it’s missing shadows, or wicks.

This gives the pattern a big rectangular block look.

The color of the Marubozu is the sole differentiator between bullish and bearish.

Identifying the Marubozu Candlestick Pattern

The Marubozu pattern indicates that a cryptocurrency has been trading strongly in one direction, as it opens at one extreme and then closes at the other.

Prices have not traded outside of the opening and closing price extremes, implying that a strong directional trade has been taking place.

To distinguish a bullish Marubozu pattern from a bearish one, simply consider the color of the candlestick’s body.

Bullish Marubozu Pattern

The bullish Marubozu candles pattern implies that the price opened at the lowest point and closed at the highest point.

This happened because buyers were in control of the price for the duration of the candle’s construction.

The color of a bullish Marubozu will be green, blue, or white.

Bearish Marubozu Pattern

The bearish Marubozu pattern is formed when prices open at the high price for the candle’s formation and close at the lowest point.

In essence, the open is the same price as the high, and the close is the same price as the low.

The color of the bearish Marubozu candlestick will be either red or black.

Using the Marubozu Candle to Trade Crypto

As mentioned, although Marubozu candle formations can be found on any time frame chart, they are fairly rare.

When they do appear, the one-candle formation with no wicks suggests strength in the current trend.

The pattern signals it could be either a strong uptrend or a strong downtrend.

How to Trade the Bullish Marubozu

The bullish Marubozu forms when the price trades swiftly to the upside.

The candle’s open forms the low price, and the Marubozu closes the candle at the high price.

Once you spot the Marubozu pattern, consider the part of the larger trend in which it has formed.

In the 2-hour Bitcoin chart above, the bullish Marubozu appears right after another strong bullish candlestick, which loosely resembles a bullish Marubozu.

This double combination appears toward the beginning of a new trend, which suggests that the trend is just starting.

You’ll rarely see an isolated Marubozu running against the main trend all by itself.

So when the bullish Marubozu appears, the trader can expect more upside potential.

As a result, opening the trade on the next candle — while placing a stop loss just below the swing low — is one way to trade the bullish Marubozu.

How to Trade the Bearish Marubozu

The bearish Marubozu is created when the candle opens near the high opening price and closes on the low.

This candle suggests a strong downward trend has been in force, leaving behind a big red or black candle with no wicks.

Shortly after Bitcoin topped in April 2021, the cryptocurrency market began to correct lower.

On April 15, the Ethereum 1-hour chart above carves a bearish Marubozu candle pattern, suggesting a strong downtrend (bearish trend).

When we look at the price action unfolding prior to this candle pattern, we can see that the market is already correcting lower.

As a result, the bearish Marubozu appears in the middle of the trend, when the bulls are giving up and market participants are turning bearish.

When the bearish Marubozu appears toward the beginning or middle of a trend, the best way to trade it is by opening on the next candle and placing a stop loss just beyond the recent swing high.

With the benefit of hindsight, we can see how this bearish Marubozu is just a small piece of the larger bear trend that unfolded around June.

Indicators to Confirm the Marubozu Candlestick Pattern

When analyzing Japanese candlestick patterns, it’s best to view them within the context of larger trends, rather than in isolation.

For example, it’s best if a bullish Marubozu candle pattern forms shortly after a bounce higher from a support level like a trend line, moving average, or Fibonacci retracement level.

Going back to the 2-hour Bitcoin example above, the price bounces higher off of the 200-period simple moving average on the chart.

This bullish bounce from an important support level indicates the bull trend is still in force.

Sure enough, as the bullish Marubozu candle pattern develops, the price action is breaking above a shorter-term resistance trend line.

Multiple pieces of confirmation exist between the bullish bounce at support and the bullish breakout above resistance.

These are signs of the larger bull rally that may carry significantly higher.

It’s rare for the Marubozu candle formation to develop right at levels of support or resistance because Marubozu tends to be a continuation pattern.

Therefore, look for prices that have recently bounced higher from support to carve a bullish Marubozu, or fall from resistance and then form a bearish Marubozu.

Is the Marubozu Signal Accurate?

One thing that’s clear when a Marubozu candle pattern is spotted is that a strong trend has powered prices to the high or low extreme of the time period.

Generally, this type of price action implies the continuation of a trend.

However, this price action is backward-looking, and the location of the Marubozu within the larger trend is critical to its potential rewards.

For example, if the Marubozu appears toward the end

of the trend in a blow-off, it actually sets the stage for a trend reversal, not a continuation.

If the Marubozu appears in the middle of the trend, a trading opportunity does exist.

However, that opportunity will not be as rewarding as if the Marubozu had appeared at the beginning of a new trend.

So, the location of the Marubozu within the context of the larger trend is important for generating positive signals.

Stay away from Marubozu formations toward the end of mature trends — unless you’re on the watch for the appearance of a reversal.

Marubozu vs. Engulfing Pattern: The Differences

The Marubozu candle pattern looks similar to the engulfing pattern.

For example, both patterns typically have big and tall candles involved in their creation.

However, there are a couple of important differences to help you distinguish between the two formations.

First, the Marubozu is a one-candle formation, whereas the engulfing is a two-candle formation.

Is it possible for the second candle of the bullish engulfing to be a bullish Marubozu within the crypto market?

In theory, it is possible.

Practically speaking, though, it’s not likely.

The bullish engulfing pattern is useful because it gaps to a new low, thereby creating a body that engulfs that of the previous candlestick.

In theory, this could happen in crypto, but it would be extremely rare.

This is because crypto trades 24 hours per day, 7 days a week.

Continuous trading is taking place, which means continuous pricing.

For crypto to gap, there needs to be an event that creates confusion in the market, such as an important news story that causes liquidity to be pulled.

In essence, the main liquidity providers would become concerned or confused, pulling back their offerings.

This type of scenario would need to occur when an old candle has closed and a new candle is opening.

As a result, this is an extremely rare occurrence.

Additionally, the engulfing candle is a reversal pattern.

The Marubozu tends to be a continuation pattern, unless it appears at the end of a trend.

Therefore, in theory, it’s possible that the Marubozu could be the second candle of an engulfing pattern.

However, this is highly unlikely.

Concluding Thoughts

The Marubozu candlestick pattern is generally great for assessing market sentiments as it signals a continuation of a current trend.

When this pattern is spotted on a crypto chart, especially if it’s early within a new trend, the buying pressure pushes the cryptocurrency’s price, thus continuing to trade higher.

If the Marubozu is spotted toward the end of a mature trend, then beware: it could signal a reversal lurking nearby.

Though the Marubozu formation is easy to identify, its usefulness is contingent upon analyzing its location within a larger trend.

While this technical indicator can provide analytical insights about the future direction of a price, trading cryptocurrencies requires you to be vigilant about the broad perspective of the market.

The use of fundamental analysis with a combination of other technical indicators is highly recommended.

 

0 Comments/by