Bearish mat hold pattern: what is it and how to use it?

A bearish mat hold is a rare but useful pattern when it comes to trading. It may help you understand whether the prevailing trend comes to an end or pauses temporarily. In this article, we'll introduce you to the bearish mat hold pattern, what it means, and how to use it.

Bearish mat hold

What is a bearish mat hold pattern?

The bearish mat hold is a pattern in which two large bearish candles are separated by three small bullish candles. These three bullish candles make new highs and are contained within the body of the first large bearish candle.

  • Pattern: Continuation.
  • Trend: Bearish.
  • Reliability: High.

This pattern appears in a bearish trend and is interpreted as a pause. We must bear in mind that this pattern can have variants since instead of being three candles that correct the first large bearish candle, there can be two or more than three.

bearish mat hold

How does the bearish mat hold work?

Here is how a bearish mat hold can be identified:

  1. The market is in a bearish trend.
  2. A red candle (bearish) with a large body appears.
  3. Subsequently, 3 green candles (bullish) with small bodies appear. These three bullish candles are contained within the body of the first large bearish candle. It should be noted that it does not necessarily have to be 3 candles, it would also be valid if there are two candles or even four.
  4. Then a large bearish candle (red) appears. It should be said that, ideally, the size of the body of these two bearish candles with which the pattern begins and ends should be more or less the same. The opposite of the bullish mat hold.
  5. After this, the bearish trend should resume its course after the small pause.

What is the psychology behind a bearish mat hold?

Before the bearish mat hold pattern forms, there is a prevailing downtrend in the market. Prices have been falling, and traders are generally pessimistic about the asset's performance. After the downtrend, there is a brief period of consolidation. This means that the price movement slows down, and there's a balance between buyers and sellers. Traders may wonder if the downward trend will continue.

The key part of the Bearish Mat Hold pattern is when a long red (bearish) candle appears. This candle opens below the previous day's close and closes significantly lower. This suggests that sellers are regaining control and are confident about pushing prices lower. The appearance of a strong bearish candle can trigger a psychological shift among traders. Those who were uncertain about the downtrend may now see the pattern as a sign to sell, believing that the downward momentum will continue.

For the bearish mat hold pattern to be confirmed, it's essential to see follow-through in subsequent trading sessions. If prices continue to decline, it reinforces the belief that the bearish trend is intact.

What is the difference between a bearish mat hold pattern and the three black crows?

The pattern of three black crows appears at the end of an uptrend. They are three consecutive red or bearish candles with large bodies. In addition, each of these candles must open within the body of the previous candle.

three blackcrows pattern

On the other hand, the bearish mat hold pattern appears in a downtrend with a large bearish candle first, followed by a pause with three small bullish candles and then another large bearish candle. In addition, as we have already mentioned, it is not a pattern that indicates a change of trend, but rather a continuation.

Japanese candlesticks

How to trade a bearish mat hold? Example

Here is an example of a bearish mat hold in a chart:

netflix bearish mat hold

The price is clearly in a downtrend and suddenly a large bearish candle appears.

Next, it takes a break, and 3 small bullish candles emerge and are within the body of the previous bearish candle.

Finally, another large bearish candle appears whose size must be equal to or greater than that of the first bearish candle.

And at the opening of the next candle, there would be the signal of the continuation of the downtrend.

Pros and cons of bearish mat hold

Finally, let's look at the pros and cons of using the bearish mat hold:

  • Simplicity when identifying the pattern
  • ✅ If it is confirmed, it can be a clear signal of continuation of the trend.
  • ✅ It can be used in multiple timeframes.

On the other hand, the cons:

  • ❌ Like any other tool, it can provide false signals.

Learn more about technical analysis

Summary

In short, the bearish mat hold pattern is a signal of bearish continuation that develops in the midst of a previous downtrend. Its requirements are clear and simple, with three small bullish candles contained within the range of an initial large bearish candle, followed by another large bearish candle. However, as with any other candle pattern, it is important to remember that it can generate false signals.

FAQs

How should traders incorporate the bearish mat hold pattern into their trading strategy?

Traders often use it as a confirmation tool for potential bearish trades, considering the overall market context and volume.

Can the bearish mat hold pattern be used for long-term investments?

While it can provide insights into bearish reversals, it is more commonly used for short to medium-term trading. Long-term investors typically rely on fundamental analysis in addition to technical analysis for investment decisions.

Can the Bearish Mat Hold pattern fail or be invalidated?

Yes, it can fail to produce the expected outcome. Traders should set stop-loss orders to manage risk in case the pattern does not play out as anticipated.

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