Falling Window Candlestick Pattern
A Falling Window candlestick pattern is a bearish continuation candlestick pattern. A Falling Window candlestick pattern is more commonly known as a gap-down. But here at Trendy Stock Charts I like to stick with the Japanese candlestick terminology when possible.
Window candlestick patterns provide extremely stiff support and resistance areas. In the case of a Falling Window candlestick pattern, a stiff resistance area is created that also provides higher probability trading opportunities on subsequent re-tests of the resistance area.
When this happens, market makers adjust instantly by driving down the stock's share price to an area where buying and selling demand are more in balance with each other.
This sharp decrease in the stock price usually happens outside of the market's normal trading hours, like after the release of bad press or a bad earnings announcement.
For those investors that employ shorting stocks in their toolbox, a Falling Window candlestick pattern can provide short-sellers the most confidence when entering into a short trade.
Just like the first gap-up in a new possible uptrend can offer a great opportunity to go long a stock, the first gap-down in a new possible downtrend offers that same great opportunity but to the short side. A Falling Window candlestick pattern offers a higher probability short sale trading opportunity.
Most gap-downs are news-driven events. Maybe it was earnings related. Maybe the share price was in a downtrend and then more bad news comes out for the company, like a top executive leaving. Either way, a gap-down is almost always the result of a news-driven event. Earnings events are the most common.
Requirements
Listed below are the requirements for a Falling Window candlestick pattern.
- It is a bearish continuation candlestick pattern
- A Falling Window candlestick pattern is a 2 candlestick pattern
- There must be an empty space between the two candlesticks in the pattern where the intra-day prices do not overlap
- There must be an empty space between the two candlesticks in the pattern where the intra-day prices do not overlap
- It is possible for one or both of the candlesticks to have green colored real bodies, however the most likely scenario is two candlesticks with red colored real bodies
Characteristics & Observations
Listed below are some of the characteristics and observations I have made for Falling Window candlestick patterns......
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