Stalled Pattern

The Stalled Pattern is an end-of-trend pattern composed of three green Japanese candlesticks.

It represents a weakness in a rise with a risk of consolidation. It is significant over all time units.

Its characteristics are as follows:

• The three candlesticks must be green.

• The 2nd candlestick must open close to the close of the day before. (no wide gap)

• The last candlestick should be short and can form an upside gap with the previous candlestick. There also might be a selling shadow on this candlestick.

On this chart, we can observe two Stalled Patterns when approaching 5300 pts.

In the first pattern, prices form a short green candlestick, then a long green candlestick and finally another short green candlestick close to the highs of the previous candlestick. The size of the last candlestick and the fact that it features a long selling wick shows that the pattern is stalling. At this moment, the trend is no longer sound and it may be interesting to place more stops in order to protect the gains that were made during the rise. A Bearish Engulfing appears and signals the start of a correction phase.

One will be able to come back on lower positions when the situation is sounder, which is what happens here after the pullback on the 4900 pts support. Prices rise again to reach the highs and form a new Stalled Pattern but this time, the last candlestick has created an upside gap so that we now have a pattern that is similar to an Evening Star, more bearish than a typical Stalled Pattern. The gains should then be protected quickly.

The day after, a Bearish Engulfing forms that announces a fall in prices. A typical Stalled Pattern cannot be used to enter in short position; it is not a true reversal signal but a mere hint that can allow you to make gains close to the highs.

When it is combined to other more powerful reversal signals, just like in the 2nd Stalled Pattern where prices form a double-top around 5300 pts and an Evening Star, this pattern can allow you to initiate a short position with an invalidation stop placed above the highs of the double-top.