Frying Pan Bottom

The Frying Pan Bottom is a bullish reversal pattern involving a series of candlesticks. It is relevant over all time units.

Its contrary is the Dumpling Top.

Its main characteristics are as follows:

• The Frying Pan Bottom must occur after a downtrend.

• The candlesticks’ bodies are normally short at the deepest point of the pattern.

• The trend slows down and then follows a concave trajectory.

The bullish gap confirms the pattern.

Such a pattern forms when, after a bearish trend, the fall becomes wheezy, the trend takes a concave trajectory and the selling forces decrease. An atmosphere of uncertainty is setting and prices form a bullish gap, which gives the buyers an advantage: the bearish traders who entered quite a long time ago want to protect their gains and those who entered in the deep cut their losses, what fosters the uptrend. This is how the deep is formed.

On this chart, we can see that prices tested the support at €21. Only the lower shadows of the Japanese candlesticks have gone down below this support but prices have gone back up above the support during the four attempts what ended up putting the bears off. The gap open thus launches a nice uptrend.

Regardless of the quality of the Frying Pan Bottom, the pattern will have to be confirmed by a bullish gap if one wishes to buy. The invalidation threshold can be placed either below the lowest point of the pattern for people trading on a medium-term basis, or below the bearish gap for people trading on a short-term basis.