An Inverted Umbrella is characterized by having no lower shadow and but a long upper shadow. The long upper shadow shows the evidence for selling pressure, but the position of high price indicates that plenty of buyers still are around. Inverted Umbrella is a reversal pattern.

Recognition Criteria:

1. The real body of the Inverted Umbrella is either a horizontal line or it is significantly small (its length is not more than a few ticks).
2. There is no lower shadow.
3. However the upper shadow is long.

Inverted Umbrella indicates that buyers dominated the trading and they were able to drive the prices higher during the day. However, sellers resurfaced by the end of the day and pushed prices back to the opening price level and to the day’s low.

Important Factors:

The Inverted Umbrella has the potential to point out evidence for buying pressure and indicate a potential bullish reversal if it appears after a long downtrend, long black candlestick or if it is seen at a visible support level. Likewise it may show a failed rally and indicate a potential bearish reversal if it appears after a long uptrend, long white candlestick or if it is seen at a visible resistance level. Bearish or bullish confirmation is required in both situations.