Bearish Thrusting Candlestick Pattern: Technical analysis is a key method for market participants speculating on the movement in the price of stock. It consists of multiple methods to predict price movement. These methods were developed based on the historical reaction and movement of prices.

One of the methods used in technical analysis is analyzing the candlestick patterns. In this article, we will discuss one such candlestick pattern called the bearish thrusting candlestick pattern.

What is the Bearish Thrusting Candlestick Pattern?

The bearish thrusting candlestick pattern is a two-candlestick pattern that market participants use to predict the stock price movement. The candlestick pattern consists of a long green candle followed by a red candle. Here the red candle must open with a gap up and close below the green candle’s close price but above the green candle’s midpoint. 

It is preferable for this pattern to be formed in an uptrend. The formation of this pattern generally indicates a bearish reversal. However, this pattern can also indicate a bullish continuation. 

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Bearish Thrusting Candlestick Pattern – Psychology

For a bearish reversal, the prior trend before the formation of this pattern is preferred to be an uptrend as the indication given by this pattern would work better.

After the formation of the first green candle, the second candle opens with a gap up due to high buying pressure but ends up closing below the close price and above the midpoint of the previous candle. Depending on the previous trend and movement, one of two things can be derived:

  1. The buying pressure has weakened and more sellers have entered the market and this selling pressure will continue to move the price lower. This would indicate a potential reversal from the uptrend.
  1. The selling pressure has increased for the duration of the pattern. However, as the second candle couldn’t close below the midpoint of the first candle, it would indicate that there was not enough selling pressure to move the price lower. Hence, the price could potentially continue to rise.

Bearish Thrusting Candlestick Pattern – strengths

Since the bearish thrusting candlestick pattern can give either a continuation or reversal indication, the market participants must be able to interpret the pattern appropriately to get the correct indication of the bearish reversal. The following is how market participants can better interpret this pattern:

  1. If the RSI is also at the overbought region when this pattern is formed in an uptrend, then the formation of this pattern will have a stronger indication of the bearish reversal.
  2. If this pattern is formed at a major resistance zone, then this pattern will have a stronger reversal indication.

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Bearish Thrusting Candlestick Pattern – Trading Ideas

Traders who wish to enter a long position based on this pattern should ensure that the trend before its formation needs to be an uptrend. Once that is confirmed, the following are the guidelines for taking a trade:

  • ENTRY: Traders can enter a short position near the close price of the second candle of the bearish thrusting pattern. If the traders wish to take a safer entry, then they can wait till a candle closes below the low price of the pattern and then take a short position.
  • TARGET: Traders can exit the trade when the price of the stock reaches near the immediate support zone. Once this level is reached, they can also book partial profits in the trade and hold on to the remaining position until the next support level.
  • STOP LOSS: Traders can place the stop loss near the high price of the bearish thrusting candlestick pattern. 

Bearish Thrusting Candlestick Pattern – Example

In the above one-day chart of HDFC BANK, we can observe that the bearish thrusting pattern was formed after an uptrend. The price had a bearish reversal after the formation of this pattern just as discussed in this article.

At the time of the formation of this pattern, traders could’ve taken a short position below Rs. 1668.65 and the stop loss was at Rs. 1725.65

Bearish Thrusting Candlestick Pattern – Failed Example

In the above one-day chart of HDFC BANK, we can see that the bearish thrusting pattern was formed. But the price didn’t go downwards its formation. Traders could’ve avoided taking a trade based on this as the pattern was not formed in an uptrend nor did the price go below the second candle to enter the trade.

Bearish Thrusting Candlestick Pattern – Limitations

Traders and market participants cannot solely rely on this pattern as this pattern indicates both continuation and reversal. It might become difficult to guess which direction the market will move after the formation of this pattern. Sometimes the price also won’t have much movement after its formation and it also reverses quickly. 

Hence, market participants might find this pattern difficult to interpret and it is recommended to use other means of technical analysis to confirm the indication given by this pattern.

Bearish Thrusting Candlestick Pattern – Key Takeaways 

  • It is preferable for this pattern to appear in an uptrend.
  • The first candle is green, the second is a red candle that opens with a gap up and manages to close below the close price but above the midpoint of the first candle.
  • It generally indicates bearish reversal but sometimes it can also indicate a bullish continuation.
  • This pattern needs to be combined with other methods of technical analysis as it can give a better indication.

Read more: Bearish Counterattack Candlestick Pattern

Conclusion

This article covers the Bearish Thrusting Candlestick Pattern, which is a typical occurrence in the financial market. It specifies the conditions that must be met for a candlestick to be designated as a bearish thrusting pattern.

Traders can use this pattern to get insight into market activity and make better trading decisions. What are your views about this pattern, please let us know in the comment section below.

Written by Praneeth Kadagi

By utilising the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


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