In a race, you might say that two competitors are neck and neck. They're almost even, so close that the advantage may be constantly shifting from one to the other, or so close that the lead is virtually indistinguishable. In the world of Japanese candlesticks, one signal plays with this saying in its title: the In Neck. Because the bottom of the first candle and the top of the second candle are so close, they're practically even. Always appearing in a downtrend, the In Neck candlestick pattern is a bearish continuation pattern. For a two-candle pattern, it's quite rare, but you can use the tips below to find and interpret the In Neck signal.
In Neck Candlestick Pattern
The In Neck candlestick pattern is composed of just two candles: one black and one white. Although it's easy to spot, you will need to keep an eye out because it appears quite infrequently. To confirm the existence of the In Neck, look for the following criteria:
First, a downtrend must be in progress. Second, a tall black (bearish) candle must appear. Third, a smaller white (bullish) candle must follow the black candle. Fourth and finally, the white candle should open below the prior candle but its close should occur at or slightly above the close of the previous day.
The name and formation of this signal is very similar to the On Neck candlestick pattern, which also occurs during a downtrend and foretells of a continuation of the current price trend. However, in an On Neck signal, the second candle closes slightly lower than the previous day's low. Because the two patterns are nearly identical, take your time when identifying one or the other.
So what is the In Neck signal trying to tell traders? Well, the bears have a strong hold on the market, and under their control the prices are moving ever lower. The first candle that appears is bearish, continuing the downtrend, but the second is bullish. The white candle opens below the black candle but closes slightly above it, hinting that a continuation of the current trend is likely. Finally, it is less severe than the On Neck because it edges further up, past the previous day's close.
If you want to confirm the presence of the In Neck candlestick pattern (and frankly, why wouldn't you?), look for a black candle on the third day, which will prove that the downtrend has continued. Although the signal is only moderately reliable, it can still teach you something useful about the current state of the market. Plus, even when you consider the wide range of candlestick patterns in existence, you can't deny that the In Neck signal has one of the oddest names around!
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