Candlestick Neck Line Patterns

There are two candlestick patterns that are considered candlestick neck line patterns. These secondary candlestick patterns include the on neck line and the in neck line candlestick patterns and both indicate the same market psychology. There is only one minor difference between these two patterns however and this difference is explained below.

The on neck line candlestick pattern is similar to the meetings lines secondary candlestick pattern. The only difference between this pattern and the meetings lines candlestick pattern is that the on neck line pattern does not reach the previous day’s close but instead reaches the previous day’s low. In other words, the body of the second candle is typically smaller than the second candle of the meeting lines pattern.

In order to qualify as an on neck line pattern three conditions must be met. First, there must be a long black candle that forms in a downtrend. Second, the following day should gap down from the previous day’s close. Again, the second day should close at the low of the previous day, as mentioned above. The in neck line pattern requires the same conditions however the second day closes at the close or slightly above the close of the previous day.

What do the on neck line pattern and in neck line candlestick patterns indicate is occurring in the markets?
The on neck line and in neck line candlestick patterns occur when the market has been in a downtrend and the first long black candle further enhances this downtrend. The following day opens lower with a small gap down however the trend is cut short by a move back up to the previous day’s low. Buyers are worried with the lack of strength in the move up and the sellers return to continue the downtrend the following day.

Japanese Candlesticks are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, and you have learned how to read stock charts continue to expand your expertise by learning the various secondary Candlestick Patterns. Combine these with your favorite technical analysis indicators, such as the moving average, and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds.

Continue to learn about continuation patterns and read about the thrusting pattern.