Ladder Bottom

The ladder bottom candlestick is a bullish reversal candlestick that is characterized by a downtrend. The current downtrend has been in place for some time and the bears are happy. The downtrend finishes with four consecutive black (or red) candles closing lower than the previous day however on the fourth day trades are higher. Still closing on the fourth day at a low, the following day opens high and stays high all day and actually closes higher than the past three days.

In order to qualify as a ladder bottom, four conditions must be met. First, the market must be characterized by a downtrend. Second, there are three long black candlesticks each day and each with lower consecutive opens and closes similar to that of the three black crows pattern. Also, on the fourth day a black candlestick with an upper shadow must occur, which resembles an inverted hammer candlestick . Lastly, the final day consists of a white (or green) candlestick that opens above the body of the fourth day’s candle. The final candlestick also closes above the trading range of the previous three days.

What does this signal indicate is occurring in the markets?
A strong downtrend has been in effect for a considerable amount of time leaving the bears comfortable. As prices start to trade above the open price and almost reach new highs the bears begin to worry. While the close still ends up being low that day, the bears worry again as it opens even higher the following day. The bulls begin to take control as the gap up on the last day closes at a considerable high. Traders who sell short begin to rethink their positions as this pattern occurs and they get ready to sell.

The ladder bottom candlestick requires confirmation of a reversal on the sixth day in the form of a white candlestick, a large gap up or a higher close.

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 stocks 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 .