Definition
In case of a Bullish Ladder Bottom formation, short position owners still have a chance for profit realisation on the fourth day. On the fifth day, an upward gap appears due to the closed short positions. If the 5th candle has a long body or the volume is high, there is a high chance for a trend reversal.
- Trend: Reversal
- Expected trend: Bullish
- Previous trend: Bearish
- Reliability: Moderate
- Type: Bullish
- Number: 5
Recognition
- The market is in a downward trend.
- The first three days are consecutive long black candles, opening and closing at new minimums. Similar to the Bearish Tree Black Crow pattern.
- The fourth day is a black candle with an upper shadow.
- The fifth day is a white candle with an upward gap.
Interpretation
On the fourth day, short position owners can still close their positions and realise profits. On the fifth day it becomes clear that the inclining trend has lost its momentum, making the number of long positions increase and short positions decrease. The volume is usually the highest on this day.
Important factors
To make sure the trend is reversed, a confirmation on the sixth day is needed. The confirmation could come from a white candle with an upward gap or a higher closing price.
