Dumpling Top

The Dumpling Top is a bearish reversal pattern composed of a series of candlesticks.

It is significant over all time units. Its contrary is the Frying Pan Bottom.

Its characteristics are as follows:

• The Dumpling Top must appear after an uptrend.

• The bodies of the candlesticks at the top are usually short.

• The trend slows down and takes a convex trajectory.

• The gap down confirms the pattern.

Such a pattern occurs after an uptrend, when the rise becomes wheezy; the trend takes a convex trajectory and the buying forces decrease.

An uncertainty atmosphere sets in before prices form a gap down that gives the buyers an advantage: the bulls who entered some time before want to protect their gains and those who entered on the top cut their losses which fosters the fall in prices. This is how the top is formed. Here, the Japanese candlesticks at the top have upper shadows. Prices went higher but they flowed back down each time. This discourages the bulls even more.

The bearish engulfing and the gap complete the pattern.

Regardless of the quality of the Dumpling Top, it is wiser to wait for the pattern to be confirmed by a gap down if one wishes to sell uncovered. The invalidation threshold can then be placed either above the highest point of the pattern for the medium-run traders, or above the gap down for the short-term traders.