Frying Pan Bottom

06 Mar at 13:38

This is a bullish reversal figure composed of a series of candlesticks. It is significant on all units of time.

The elements that characterize it are:

  •      It should appear after a downtrend.
  •      The bodies of candlesticks at the summit are generally small.
  •      The trend slows and takes a concave trajectory.
  •      The bullish gap confirms the structure.

Such a structure is formed when, following a downward trend, falling becomes sluggish, the trend takes a concave trajectory, the selling forces decrease. A climate of uncertainty settles and the rates form a bullish gap which gives an advantage to buyers: bearish traders returned some time ago to protect their gains and those returned to the hollow cut their losses which keeps rising. The trough is then formed.

We can observe in the example that support was tested at € 21. Only the low shadows of the candlesticks have descended under the support but the rates have risen above it, during 4 attempts which eventually discourage the bears. Thus, the gap opening starts a nice uptrend.

Whatever the quality of the frying pan bottom, one should wait for a confirmation of the figure by a bullish gap if one wants to buy. The threshold for invalidation may be placed either below the lowest formed by the structure, for medium term traders, or under the bearish gap for short-term traders.

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