Bullish Stick Sandwich Candlestick Pattern

• It is a three candlestick pattern observed at the end of a bearish rally.
• This type of pattern indicates trend reversal and the trend becomes bullish.

Traders Psychology:

• As there is a bearish rally in the market, the first candle in the pattern is a long red candle which indicates further bearishness.
• The candle on the second day opens a gap up due to some positive news in the market and because of it, slight bullishness started. Therefore the candle closed around the previous day open.
• Few bears who went short in the rally, initiated short covering as soon as a green candle was seen. This led to a further gap up on the third day.
• But, the bears who were there in the bearish rally for a long time started showing their aggressiveness and as a result, the candle ultimately closed around the first day close.
• Now, traders observed the support line which was formed because of the same closing price of the two red candles.
• Therefore, bulls start exercising their strength if the next candle closes higher than the high of the last red candle and this leads to trend reversal.

As we can clearly see in the image that a green candle is being sandwiched between two long red candles and since this pattern leads to a bullish trend, it is named as the stick sandwich bullish pattern.

If a trend reversal is observed, i.e., if a candle closes above the red candle open, traders should enter the market at the close price of the new candle and the stop loss would be the same as the support line.

This is the 5 min chart of JP Morgan Chase & Co. on Jan 28, 2016

Bearish Stick Sandwich Pattern

• It is a three candlestick pattern observed at the end of a bullish rally.
• This type of pattern indicates trend reversal and the trend becomes bearish.

Traders Psychology:

• As there is a bullish rally in the market, the first candle in the pattern is a long green candle which indicates further bullishness.
• The candle on the second day opens a gap down due to some negative news in the market and because of it, slight bearishness started. Therefore the candle closed around the previous day open.
• Few bulls who went long in the rally, initiated long unwinding as soon as a red candle was seen. This led to a further gap down on the third day.
• But, the bulls who were there in the bullish rally for a long time started showing their aggressiveness and as a result, the candle ultimately closed around the first day close.
• Now, traders observed the resistance line which was formed because of the same closing price of the two green candles.
• Therefore, bears start exercising their strength if the next candle closes lower than the open of the last green candle and this leads to trend reversal.

As we can clearly see in the image that a red candle is being sandwiched between two long green candles and since this pattern leads to a bearish trend, it is named as the stick sandwich bearish pattern.

If a trend reversal is observed, i.e., if a candle closes below the green candle open, traders should enter the market at the close price of the new candle and the stop loss would be the same as the resistance line.