Hanging Man Candlestick Pattern
A Hanging Man candlestick pattern is a bearish reversal candlestick pattern. This candlestick pattern signals that the uptrend has just ended or is in the final, and I do mean final, stages of the uptrend.
For those holding shares of a company when a Hanging Man candlestick pattern develops on its stock chart, this candlestick signals it is time to lock in gains and sell some shares as price declines are more likely than not projected for the short-term, if not longer.
When all the requirements and characteristics of a Hanging Man candlestick pattern are met, one should consider selling shares and locking in gains. At least wait to see what happens in the short-term before deciding to re-enter the position.
The term “hanging man” implies that anyone holding shares will be "hung" in their position. Do you want to be hung in your position? If not, then consider and evaluate your scale-out strategy.
A Hanging Man candlestick pattern is a sign that the bearish investors are ready to step in. Matter of fact, they already did step in by helping to push the price down and create the long lower shadow as part of the Hanging Man candlestick. I believe the sellers are testing the support underneath the current price. Then they let the bullish buyers bid back up the price before the end of the trading session.
When this pattern appears at the top of a long and extended uptrend, there are usually a nominal amount of buyers left for the stock. Everyone has already bought into the stock. Sellers tend to gain the upper-hand at this moment.
Requirements
Listed below are the requirements for a Hanging Man candlestick pattern.
- A Hanging Man candlestick pattern is a bearish reversal candlestick pattern
- The real body of the Hanging Man can be either green or red colored
- The Hanging Man candlestick must develop at the end of an uptrend
- The length of the candlestick's lower shadow must be at least twice the length of the real body
Characteristics & Observations
Listed below are some of the characteristics and observations I have made for Hanging Man candlestick patterns over the years......
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