What would you like—PB&J, grilled cheese, French dip, caprese, muffuletta, BLT . . . ? Or how about a Stick Sandwich? No, it’s not as appetizing as your other options, but the Stick Sandwich is the only sandwich to boast an important role within the world of Japanese candlesticks. Formed by three candles, the Stick Sandwich candlestick pattern can have both bullish and bearish implications, depending on the colors of the candlesticks. If you aren’t quite ready to add this candlestick pattern to your menu, scroll down to learn what the Stick Sandwich looks like and what it means for interested investors.

Stick Sandwich Candlestick Pattern

Form

Although spotting a Stick Sandwich candlestick pattern isn’t very difficult, you will still need to know the basic criteria before you can work with the signal successfully. So before you dig into this sandwich, keep an eye out for the following details:

First, there must be three candles in a row—easy, right? Not so fast! Second, the middle candle must be the opposite color of the candles on either side of it. As you might have guessed, a bearish sandwich will run green-red-green and a bullish sandwich will run red-green-red. Third, the candles on each side will have larger trading ranges, making them longer than the candle in the middle. Fourth, the middle candle will be shorter, so that it is engulfed by the candles on each side of it. Finally, the bullish Stick Sandwich must occur during a downtrend while the bearish Stick Sandwich must occur during an uptrend.

Meaning

Since the Stick Sandwich can occur in both bull and bear markets, you will need to make note of the colors involved. What color are the candlesticks on either side? What color is the candlestick sandwiched in the middle? Once you know if the pattern is bearish or bullish, you can move forward. In a bullish market, the bulls are in control until the second candle enters the picture. This candlestick shows that the bulls’ dominance may be ending. In a bearish market, the opposite is true.

In addition, because the two candles on each side of the signal have equal closing prices, the pattern has strong support, and the probability of a reversal is high. The fact that both of the candlesticks have closed at the same level shows that a support price has been established. Look for the confirmation level, which is the midpoint between the last two closes. Be sure that the price crosses above (for bullish) or below (for bearish) this point before you move forward.

Finally, when deciding how to react to a Stick Sandwich, many traders look to the last candlestick for cues, making note of its closing price. So before you make any rash decisions, be sure to wait for the third candlestick’s high (in a bullish) or low (in a bearish) to break. Good luck!

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