Definition: Get the highest rated stock from Americanbulls for this pattern >>>
The Bearish Hanging Man Pattern is a single candlestick
and a top reversal pattern. It is very similar to the
Bearish Dragonfly Doji Pattern. In case of the Bearish
Dragonfly Doji Pattern, the opening and closing prices
are identical whereas the Bearish Hanging Man Pattern
has a small real body.
Recognition Criteria:
1. We see it at a market top or during an uptrend.
2. It is characterized by its small real body at the
upper end of the trading range and it is located above
the trend. The color of the body is unimportant.
3. It has a lower shadow, which is at least twice the
height of the real body.
4. There is either no upper shadow or a very short upper
shadow.
Explanation:
The hanging man is a bearish reversal pattern. It signals
a market top or a resistance level. Since it is seen
after an advance, a Bearish Hanging Man Pattern signals
that selling pressure is starting to increase. The low
of the long lower shadow indicates that the sellers
pushed prices lower during the session. Even though
the bulls regained their footing and drove prices higher
by the finish, the appearance of this selling pressure
after a rally is a serious warning signal.
Important Factors:
Ideally; the lower shadow of the Bearish Hanging Man
Pattern must be two or three times the height of the
real body. However, a long lower shadow may not have
to be twice the height of the real body in the real
life conditions in order to signal a reversal. The pattern
is more perfect if the lower shadow is longer.
The Bearish Dragonfly Doji Pattern is a more bearish
signal than the Bearish Hanging Man Pattern and it is
also more reliable than the Bearish Hanging Man Pattern.
If a Bearish Hanging Man Pattern is characterized by
a black real body, it shows that the close was not able
to get back to the opening price level, which has potentially
bearish implications.
We need a confirmation of the reversal on the next
day for a more definite proof about the reversal of
the uptrend. This confirmation may be in the form of
a black candlestick, a large gap down or a lower close
on the next trading day.
