Mat Hold Pattern

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Table of Contents

What Is a Mat Hold Pattern?

A mat hold pattern is a candlestick formation that indicates the continuation of a prior move.

There can be either bearish or bullish mat hold patterns.

A bullish pattern starts with a large upward candle followed by a gap higher and three smaller candles that move lower.

These smaller candles must stay above the low of the first candle.

The fifth candle is a large candle that moves to the upside again.

This pattern occurs within an overall uptrend.

The bearish version is similar, except candles one and five are large down candles, and candles two through four are smaller and move to the upside.

These smaller candles must stay below the high of the first candle.

The pattern completes with a long candle to the downside, which is the fifth candle.

It must occur within a downtrend.

What the Mat Hold Pattern Tells You

When a bullish mat hold pattern occurs within an uptrend, it signals that the uptrend is likely resuming to the upside.

Traders may opt to buy near the close of the fifth candle (the large up candle) or enter a long trade on the following candle.

A stop loss is typically placed below the low of the fifth candle.

When a bearish mat hold pattern occurs within a downtrend, it indicates the downtrend is likely resuming, and prices will continue to fall.

Traders may opt to sell or short near the close of the fifth candle or on the following candle.

A stop loss on short positions is placed above the high of the fifth candle.

Both versions of the pattern are quite rare.

They demonstrate that the price is moving strongly in the trending direction (candle one), and there is only minor pressure in the opposite direction (candles two through four) before the price starts moving in the trending direction again (candle five).

What is the Difference Between a Mat Hold and a Rising Three Pattern?

A rising three pattern is very similar to a mat hold pattern, except there isn’t a gap following the first candle.

This pattern is also not very common.

Limitations of the Mat Hold Pattern

The mat hold pattern is difficult to find.

It occurs infrequently, and the price doesn’t always move as expected following the pattern.

There is no profit target for the mat hold pattern.

Even if the price moves as expected, the pattern doesn’t indicate how far the price could run.

This will require another method, such as trend analysis or technical indicators, to determine an exit, or possibly another candlestick pattern.

The mat hold pattern is typically best used in conjunction with other forms of analysis, as it may be unreliable if traded solely on its own.

Concluding Thoughts

The mat hold pattern can be a powerful tool for traders looking to identify continuation patterns within a trend.

However, due to its rarity and the potential for deviations, it is essential to use this pattern in conjunction with other technical analysis methods.

By doing so, traders can improve their chances of success and better navigate the complexities of market movements.