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Bearish Belt Hold Candlestick Pattern Explained

Introduction:

You may need various technical analysis tools when trading in the stock market. The more you know about them, the better decisions you can make and the more effective your strategies can be. The Bearish Belt Hold candlestick pattern is one of the technical tools used in trading. Candlestick charts stand as crucial technical tools for traders. Originating in Japan, they are a much-used tool today as they offer a visual aid to traders to analyse price movements in the market. This guide can help you understand the Bearish Belt Hold candlestick pattern in detail so you can use it in your trades. 

What is the Bearish Belt Hold candlestick pattern?

The Bearish Belt Hold candlestick pattern is a single-candle formation occurring in an uptrend. It unfolds with a bullish opening candle followed by a decisive bearish counterpart. The second candle opens at a high and signals a notable gap from the preceding close. As the trading session progresses, prices deviate from the prevailing uptrend and culminate in a close near the day's low. The small shadow at the candle's bottom signifies the lowest point reached during the session. 

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The Bearish Belt Hold candlestick pattern serves as a potential reversal signal and suggests a weakening of bullish momentum. This highlights a shift in the market sentiment. This is a sign for traders to exercise caution and seek additional confirmation through technical analysis before making any decisions regarding potential trend reversals.  

Understanding a Bearish Belt Hold candlestick pattern involves a multi-faceted approach to confirm the signal. While the pattern itself is relatively easy to spot, its significance is greatly enhanced through confirmation from preceding periods. Firstly, it is crucial to analyse the candlesticks from previous days to ensure a clear and sustained uptrend. This is essential in confirming that the market sentiment has shifted. Additionally, the candlestick representing the Bearish Belt Hold should be extended, emphasizing the strength of the bearish sentiment that countered the preceding bullish trend. Traders must also look for confirmation in subsequent sessions. The following day's candlestick should ideally continue the bearish momentum. 

What are the conditions for a Bearish Belt Hold candlestick pattern?

The formation of a Bearish Belt Hold candlestick pattern involves two specific conditions: 

  • The pattern commences with a bullish candle, indicating a positive market trend. This initial candle serves as a representation of the existing upward momentum. The second candle that forms the Bearish Belt Hold candlestick pattern must exhibit a gap-up opening. This means it opens at a higher price than the previous candle's close, creating a noticeable gap between the two candlesticks.  
  • The second candle should experience a decline in prices throughout the trading session. This leads to a close at or very near the closing price of the preceding bullish candle. This position reinforces the reversal signal and indicates that despite the initial optimism reflected in the bullish trend, the subsequent bearish candle signifies a shift in market sentiment.

Requirements for Bearish Belt Hold candlestick pattern 

A Bearish Belt Hold candlestick pattern requires three fundamental factors, as explained below:

  • A shaven top: A defining feature of a Bearish Belt Hold candlestick pattern is the absence of an upper shadow, commonly called a shaven top. Ideally, there should be no upper shadow. In instances where an upper shadow is present, it should be very minimal. 
  • Closing at or near session lows: The effectiveness of the Bearish Belt Hold candlestick pattern is heightened when the stock's closing price is at or close to the session lows. 
  • Real bodies and colour variation: The Bearish Belt Hold candlestick pattern typically manifests with red-colored real bodies, denoting a bearish market sentiment. However, it is noteworthy that green-colored real bodies may also be seen in some scenarios. 

To sum it up 

Understanding and mastering the Bearish Belt Hold candlestick pattern can significantly enhance your ability to navigate the stock market. Adequate to the specific conditions and requirements outlined in this guide to use this candlestick pattern effectively. 

 

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