On Neck Candle Pattern
My book, Encyclopedia of Candlestick Charts
, pictured on the left, takes an in-depth look at candlesticks, including performance statistics.
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On Neck Candlestick: Important Results
Theoretical performance: Bearish continuation Tested performance: Bearish continuation 56% of the time Frequency rank: 70 Overall performance rank: 33 Best percentage meeting price target: 64% (bear market, up breakout) Best average move in 10 days: 8.32% (bear market, up breakout) Best 10-day performance rank: 6 (bear market, up breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions. |  On Neck |
On Neck Candlestick: Discussion
The on neck candlestick pattern is a two line candle with a downward price trend leading to it. A tall black candle is the first to appear followed by a white candle with a close that matches the prior low.
The pattern works in theory as it does in reality, that is, as a bearish continuation 56% of the time. I consider that “near random.” The best average move 10 days after the breakout occurs in a bear market after an upward breakout. Price climbs 8.32% when a move of 6% is considered good. That gives it a very high 10-day performance rank of 6 (out of 103 candle types, where 1 is best).
On Neck Candlestick: Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.
- On neck candles that appear within a third of the yearly low perform best — page 610.
- Select tall candles for the best performance — page 610.
- On neck continuation candles occur most often within a third of the yearly low — page 611-612.
On Neck Candlestick: Example
The on neck candlestick pattern shown on the daily chart is circled in red. Price forms a tall black candle followed by a white candle. The closing price of the white candle is at or near the low of the black candle. Both appear in a downward price trend, as required.
In this example, the on neck breaks out downward two days after it completes in what looks to be a high wave candle (it would be a long legged doji or even a Rickshaw man but the body has a height and the shadows should be longer for a rickshaw man). The downtrend reverses there and moves up only to reverse and eventually continue moving lower, joining the primary down trend already in existence.
