Stalled Candle Pattern Explained (real chart examples)

Stalled Candle Pattern Explained (real chart examples)
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The Stalled Candle Pattern is a candle pattern formed by three candles with consecutively higher high closes and signals a potential reversal in the market. In this article we will show you how to identify them in the right market position with real chart examples.

The Stalled Candle Pattern is a three candle pattern which signals a potential reversal in the market. The Stalled Candle Pattern is bearish and should be identified as a signal when occurring in an up-trending market or at the top of a range.

Stalled Candle Pattern Criteria:

  • A group of three green (bullish) candlesticks with consecutively higher high closes.
  • If the first two candlesticks are long green (bullish) candles that make a new high followed by a small green candlestick, it is called a stalled pattern.
  • The last small candlestick can either gap away from the previous longer green body or it can be “riding on the shoulder” of the long green real body.

Additional notes:

  • This pattern suggests that the bull’s strength has been at least temporarily exhausted.
  • The small real body discloses a deterioration of the bulls’ power.
  • The stalled pattern can be a signal that it is time for the longs to take profits.

Quick Reference Guide – Candlestick Basics. If you need a reminder of what candlesticks are have a look at our free PDF – Candlesticks Explained.

The criteria and examples above are just the technical definitions of this pattern. However patterns are only useful with context and with real chart examples.

No pattern will ever exactly match the criteria and in order to be a useful signal must occur in the correct place in a trend. Let’s start by looking at the classification table for this pattern.

Stalled Candle Pattern Classification Table

Number of Candles In Pattern 3
Type: (Reversal/Continuation) Reversal
Bullish/Bearish/Indecision Bearish
Market Conditions: Range, Down-trend, Up-trend Up-trend, Range
Position: Top, Bottom, Range Top

What Price Action Does The Stalled Pattern Represent?

All candlestick patterns are formed by price action. But the popular ones represent price action that may have significance in signalling the direction of the market.

The Stalled Candle Pattern is formed by three consecutive bullish candles, the first two are relatively long suggesting strength but can also signal the potential for exhaustion of the trend.

The third candle can gap up or sit on the shoulder of the second candle but is significantly smaller than the first two candles.

This candle forms the Stalled Candle Pattern as it is a sign that the exhaustion of the trend has happened and could lead to a reversal.

Any potential reversal signal should be treated with caution and in regards to where it forms in a trend. It can often be more useful as a signal to exit longs rather than to short the market.

As with all reversal patterns, these signals are better when seen after a sustained trend in one direction. The signal is best when formed in a trend but can also be valid when formed at the appropriate place in a ranging market.

Hint: It is always good practice to look for confirmation for any signal that you are looking to trade.

Stalled Pattern Example With Confirmation

In this example on the US30 market the price action had been in an up-trend. A period of consolidation occurred before a strong bullish move towards a key round level resistance area.

The market then formed a Stalled Candle Pattern, signifying a loss of momentum. This along with the resistance level was too much for the market to break through and a reversal occurred.

Stalled Candle Pattern With Confirmation Example
Stalled Candle Pattern With Confirmation Example

Note: you can get a free round level indicator for MT4 from us here: Round Levels MT4 Indicator.

In What Market Conditions Does The Stalled Pattern Become A Signal?

To recap – the Stalled Candle Pattern is a potential signal when occurring at the top of a trend, especially after a sustained uptrend.

When forming at the top of a range it can also be a potential signal when that the top of the range will hold and reverse back down.

It could be seen as a signal to cover longs or as a signal to short the market with more caution.

Let’s look at some more real chart examples.

Stalled Candle Pattern In An Up-trending Market

An up-trending market is one where the price action generally moves down over time and is characterized by higher lows and higher highs.

Up-trending Market Example
Up-trending Market Example

In this US30 market example the market was uptrending and then a Stalled Candle Pattern formed. The third candle was significantly smaller and had a long relative upper shadow.

This signaled a loss of momentum and the trend moved into consolidation.

Stalled Candle Pattern In An Up-trending Market Example
Stalled Candle Pattern In An Up-trending Market Example

Stalled Candle Pattern In A Ranging Market

A ranging market is one where the price action moves up and down between two sets of support and resistance. This is also known as a sideways, balancing or horizontal market. In essence the price action is struggling to break out of the range decisively either on the upside or downside.

Ranging Market Example
Ranging Market Example

Although not traditionally used as a signal in a ranging market, it can still be a useful tool to help define the top of a range.

This is because the price action it represents (slowing momentum) is the type of signal that is useful to indicate that the market is less likely to break out of the range to new highs.

In the US30 market example below you can see an example where a Stalled Candle Pattern created the first level of resistance in a range and then a second Stalled Candle Pattern formed to confirm the top of the range.

Stalled Candle Pattern In A Ranging Market Example
Stalled Candle Pattern In A Ranging Market Example

Stalled Candle Pattern Significance

As mentioned this pattern is all about signalling a loss of momentum – a “stalled” trend. As such it should really only be identified as a potential reversal signal after a period of sustained upward momentum.

The screenshots below show how often this pattern or candles very close to this pattern can form with little or no significance to the market trend, so be careful.

Stalled Candle Pattern In An Up-Trending Market

Stalled Candle Pattern In An Up-Trending Market Significance Example
Stalled Candle Pattern In An Up-Trending Market Significance Example

Stalled Candle Pattern In A Down-Trending Market

Stalled Candle Pattern In A Down-trending Market Significance Example
Stalled Candle Pattern In A Down-trending Market Significance Example

Stalled Candle Pattern In A Ranging Market

Stalled Candle Pattern In A Ranging Market Significance Example
Stalled Candle Pattern In A Ranging Market Significance Example

Candle Pattern MT4 Indicator Downloads

If you trade using MT4 then why not try out our free MT4 indicators? Most of our indicators, including the most common candle pattern indicators are Free and available for download here: MT4 Indicator Page.

Most of our candle indicators also have an alternate version which can show the signal in a separate indicator window of the chart if that is your preference.
For advanced users you can use our Pin Bar Pattern Manager (Paid) to specify your own parameters of candles you want to identify. You can find that here.

Important Information About Candlestick Patterns

Attribution:

All of the candlestick patterns that we explain on NothardTrading.com must be attributed to Steve Nison and his books on candle charting, the most famous of which was Japanese Candlestick Charting Techniques (Amazon). You can also find out more at his website here.

Interpretation Of Candle Patterns:

It is important to note that these patterns were originally identified on the daily timeframes of index charts, which is still where they are the most useful. However, this does not mean that they cannot be used for other markets or time frames.

No signal is perfect and should never be used as such. Any patterns that you identify only signals a potential move based on the fact that history repeats itself and forms regular patterns in similar situations.

But past performance is no guarantee of future results! So always treat these patterns with care and think of these guidelines when using them.

Best practice guide for trading of candle patterns:

  • No pattern is ever perfect. Be aware that patterns will form slightly differently each time and in different markets.
  • Use them as consistently as possible. Even though you will never find patterns exactly the same, you should always implement a consistent ruleset when identifying and using patterns.
  • It is never a guarantee, only an indication.
  • Make sure you are using it in the right context. For example if it is a continuation pattern then don’t use it to trade reversals!
  • Use multiple signals (confirmations) to have more confidence in your trading.

More About Candlestick Patterns

If you are interested in reading more about candlestick patterns you can find our articles on this topic here: https://www.nothardtrading.com/category/candle-patterns/ or choose a pattern below to read more. 

Related Candle Patterns

Advance Block Candle Pattern

The Stalled Candle Pattern is very similar to the Advance Block Candle Pattern. They are both Bearish Reversal patterns that signal a loss of momentum. To read more about this related pattern have a look at this article: Advance Candle Block Pattern.

Justina Nothard

Justina Nothard

Hi, I’m Justina Nothard, a retail investor trading Stock Index Futures.

I understand how hard it can be for the ordinary trader to learn the basics and find useful tools and practical information.

This is why I decided to create Nothard Trading to help you take control of your trading.

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