BULLISH LADDER
BOTTOM
| Type: | Reversal |
| Relevance: | Bullish |
| Prior Trend: | Bearish |
| Reliability: | Medium |
| Confirmation: | Suggested |
| No. of Sticks: | 5 |
The shorts may have a chance to close their positions and realize their profits by the fourth day of a considerable downtrend. Then we see an upward gap on the fifth day as a result of this. If the body of the fifth day is long, or the volume of trading is high, this may also imply a bullish reversal.
Recognition Criteria:
1. Market is characterized by downtrend.2. We see three long black candlesticks characterized by consecutively lower opens and a closing sequence just like the Bearish Three Black Crows Pattern.
3. Then we see a black candlestick on the fourth day with an upper shadow.
4. Finally we see a white candlestick opening above the body of the fourth day on the fifth day.
Explanation:
There is a considerable downtrend for some time and the bears are happy. Then we see a good move downward. Prices start trading above the opening price and almost reaching to the new high of the previous day, but then they close at another new low. This action is a warning for shorts telling them that the market will not go down forever. The shorts may then be forced to reevaluate their positions and they may start closing their positions on the next day if profits are good. This act is the reason behind the upward gap we see on the last day of the pattern and also the close is considerably higher. If volume is high on the last day, a trend reversal has probably occurred.
Important Factors:
A confirmation on the sixth day is suggested in the form a white candlestick, a large gap up or a higher close, to be sure that the market has reversed.