A bullish mat hold is a less common candlestick pattern. In this article, we'll introduce you to how it is used in trading, how to recognise it, and how you could use it in your trading strategy.
What is a bullish mat hold pattern in trading?
The bullish mat hold pattern is considered a continuation pattern, suggesting that the upward trend is likely to continue after the pattern is completed. It consists of a first large bullish candle, a pause with three small bearish candles, and completes with another large bullish candle, which indicates the resumption of the upward trend. This candle should ideally close above the close of the first bullish candle, confirming the bullish sentiment.
- Pattern: Continuation.
- Trend: Bullish.
- Reliability: High.
This pattern appears in a bullish 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 bullish candle, there can be two or more than three.
It is perhaps not the most common pattern, but could be useful to understand in order to avoid false signals.
How does the bullish mat hold work?
Here is an explanation of how to recognise a bullish mat hold:
- The market is in a bullish trend.
- A green candle (bullish) with a large body appears.
- Subsequently, 3 red candles (bearish) with small bodies appear. These three bearish candles make new lows and are contained within the body of the first large bullish candle. It should be noted that it does not necessarily have to be 3 candles, it could also be valid if there are two candles or even four.
- Then a bullish candle (green) whose body is large appears. It should be noted that, ideally, the size of the body of these two bullish candles with which the pattern begins and ends should be more or less the same.
- After this, the bullish trend should resume its course after a small pause.
What is the psychology behind a bullish mat hold?
At the beginning of the pattern, there is an existing uptrend in the market, which means prices have been generally going up. Traders are generally optimistic about the asset.
After the initial uptrend, 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 are uncertain about whether the upward trend will continue.
The key part of the pattern is when a long green candle (bullish candle) appears. This candle opens above the previous day's close and closes significantly higher. This suggests that buyers are gaining control and are confident about pushing prices higher.
The appearance of a strong bullish candle can trigger a psychological shift among traders. Those who were uncertain about the uptrend may now see the pattern as a sign to buy, believing that the upward momentum will continue.
For the bullish mat hold pattern to be confirmed, it's essential to see follow-through in subsequent trading sessions. If prices continue to rise, it reinforces the belief that the bullish trend is intact.
What is the difference between a bullish mat hold and the three white soldiers?
The pattern of the three white soldiers is formed by three consecutive bullish green candles. Each of them must open and close at a higher point than the previous one, and they must have large bodies and little or no wick. Unlike the bullish mat hold, the three white soldiers have no red candles in between.
On the other hand, the bullish mat hold appears in an uptrend and contains three small red candles in between the bullish green candles.
In addition, while the three white soldiers pattern is usually identified at the beginning of a bullish trend, the bullish mat hold is simply a continuation pattern of the trend.
How to identify a bullish mat hold? Example
Check the following chart with an identified bullish mat hold:
As seen, as long as the three small bearish candles remain within the body of the first green candle, the pattern holds. The last green candle is the confirmation of the continuation of the trend and completes the pattern. In this case, if you have a long position, it would be a sign that the trend will continue.
Pros and cons of bullish mat hold
Finally, these are the pros and cons of the bullish mat hold:
|✅ Use in multiple time frames
|❌ Possible false signal
|✅ Simplicity (only five candles required)
|✅ Reliability of the pattern, as it is consolidated with two large candles.
Learn more about chart analysis
In conclusion, identifying the bullish mat hold pattern is useful in technical analysis. It is a sign of a short pause in the prevailing trend. To identify the prevailing trend, trend indicators may also be helpful, especially to avoid false signals. Using Japanese candlesticks, for your strategy, will increase your skills.
What does a Bullish Mat Hold pattern mean?
It suggests that after a period of consolidation or uncertainty, buyers have regained control, and there's a strong possibility of a bullish trend continuation.
Is the Bullish Mat Hold pattern a reliable indicator for trading decisions?
Like all technical patterns, it should be used in conjunction with other indicators and analysis tools for confirmation. It's not guaranteed, but it can provide valuable insights.
Can the Bullish Mat Hold pattern appear on any timeframe?
Yes, it can appear on various timeframes, from intraday charts to daily and weekly charts. The significance may vary based on the timeframe.