05 Jul , 2022 By : Kanchan Joshi
The equity market is fueled by consistent buyer and seller sentiment, which determines whether market indices increase or decline. However, there are times when neither the purchasing nor the selling tendencies are powerful enough to drive the market in a specific direction. As a result, the market moves aimlessly under the influence of uncertainty. A spinning top candlestick can assist you comprehend the situation in such instances.
What is a spinning top pattern?
A spinning top pattern consists of a single candle that represents market uncertainty. The candlestick itself has a small body surrounded by long (roughly the same length) wicks on either side. At the candle's closure, the spinning top can either be bullish or bearish. This candlestick pattern frequently appears in uptrends, downtrends, and sideways movements, all of which indicate potential trend reversals.
At the apex of an uptrend, a spinning top may indicate that the bullish is losing steam and the trend is likely to turn around. However, a spinning top at the bottom of a downtrend indicates that the bearish is losing ground and that the bullish may eventually seize the initiative. It implies that a spinning top may signal an impending, significant shift in a trend. To know whether prices would fall following the upswing, the next candle must corroborate the previous one.
What is the structure of spinning top candlestick?
Spinning top candlestick is a candlestick style with a short body sandwiched between an upper and lower long wick. The spinning top represents a situation in which neither the buyer nor the seller has benefited. As a result, the starting and closing price units are equal.
When a spinning top candlestick forms, particularly after a price decrease, it might assist predict the likelihood of a price turnaround. The candlestick is known as a continuation pattern because of the slight change in market trend.
Small real body- the starting and closing prices of a day are shown on a candlestick's real-body. A short real-body indicates that the opening and closing prices are closely correlated. Take an asset with an initial price of Rs210 as an example. It may close at a high of Rs213 or a low of Rs207. A short real-body is the result of the differences being quite small.
Upper wick- It ties the high of the day to the real body. The top wick is tied to the close value if the candle is bullish.
Lower wick- It displays the day's lowest point. If the candle is red or bearish, the lower shadow is linked to the close value. On the other hand, if it is a bullish spinning top, it relates to the real body's opening value.
What does the pattern signify?
The upper shadow indicates that the bulls did make an effort to drive the stock price higher but were unsuccessful in doing so. The real body would have changed to a long green candle if the bulls had prevailed. Because of this, it can be said that the bulls tried to push the markets higher but were unable to do so.
The lower shadow indicates that the bears made an effort to drive down stock prices, but they were ineffective. The real body would have turned into a lengthy red candle if the bears had been successful. Thus, this might be seen as a bearish attempt to drive down stock prices, but they were unsuccessful.
The spinning top candle represents buyer and seller hesitancy in the market, which may portend price reversals. It's critical to understand where the Spinning Top is in relation to the market, whether it's within a trend or at crucial price levels of support and resistance. At these specific times, the Spinning Top candlestick pattern is the most effective.