It’s essential for traders to comprehend price movements using candlestick patterns, a crucial technical tool. Candlestick charts display patterns over a specific time period, providing insights into market trends such as reversals, continuations, or indecision. This article aims to examine the Bearish Mat Hold candlestick pattern, discussing its significance, features, and psychology, illustrated with chart examples.

Bearish Mat Hold Candlestick Pattern – Definition

The Bearish Mat Hold is a rare and powerful candlestick pattern that signals the continuation of a downtrend. It consists of five candles: a tall and negative first candle, followed by three small, bullish candles, and finally, a large and bearish fifth candle that closes below the low of the pattern. 

This pattern indicates that the trend will continue to be bearish, with the three smaller candles representing a temporary pullback or consolidation phase before the prior trend resumes.

Bearish Mat Hold Candlestick Pattern – Formation

The bearish mat hold pattern is a bearish continuation pattern that can appear in the middle of an existing downtrend. This pattern comprises the following candles:

1. A bearish red candle that is a part of the current downtrend
2. A gap down opening below the close of the red candle followed by three green candles that close below the opening price of the first red candle.
3. A large red candle that closes below the three green candles.

This pattern suggests that the sellers have regained control after the slight pullback in the market.

Bearish Mat Hold Candlestick Pattern – Psychology

The Bearish Mat Hold candlestick pattern is a unique formation that reflects the persistence of the bears in the downtrend.

Here, the first large red candle in the pattern in the downtrend indicates the strong buying pressure in the market. This is followed by a gap-down opening which further emphasises the control of bears in the market.

This is followed by three green candles that close below the low of the first red candle, indicating that the bulls weren’t able to overcome the bears in the market. Following this is a large red candle that closes below the prior three green candles. This indicates that the bears have regained control and the downtrend will likely continue.

Bearish Mat Hold Candlestick Pattern – Trading Ideas

Before the appearance of this pattern, traders should ensure that the previous trend must be a downtrend.

• Entry-  After the formation of the Bearish Mat Hold pattern, traders can take a short position at or just below the close price of the final candle of the pattern.
• Profit Target- Traders can exit the trade when the price of the security reaches near the immediate support zone. Once this level is reached, partial profits can be booked in the trade and the remaining position can be held until the next support level.
• Stop loss- The stop-loss should be placed above the open price of the fifth candle.

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Bearish Mat Hold Candlestick Pattern  – Example

In the above chart of HDFC Bank, we can observe the formation of the Bearish Mat Hold pattern in a downtrend. 

As discussed in the article, the price of the security saw a bearish movement after the formation of this pattern. At the time of the formation of this pattern, a trader could have taken a short position when the price of the stock started trading below Rs. 1563.15 and the stop loss was at Rs. 1566.35.

Key Characteristics 

1. Formation: The pattern is a five-candlestick continuation pattern that forms in the middle of a downtrend.
2. Price Action: The opening price of the second candlestick should be lower than the close of the first candlestick, forming a downward gap.
3. Continuation Signal: The bearish mat hold pattern suggests that the bearish trend is likely to continue, as it demonstrates that sellers are still in control.
4. Confirmation: The fifth candlestick acts as a confirmation of the continuation of the downtrend. 

Conclusion

The bearish mat hold pattern is an important candlestick that traders can use to recognize a potential bearish continuation in security. Being familiar with how it forms, its significance, and the trading setup it offers helps traders in making well-informed trading decisions.

Traders need to verify the formation of this pattern along with using other technical tools to avoid false signals. Additionally, implementing effective risk management, maintaining good risk-reward ratios, and consistent practice will lead to long-term profitability for traders.

Written by Deepak

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