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There are candlestick patterns that show seemingly every potential move or direction a stock or ETF could go next, and the more easily you recognize those patterns, the more successful you will be as a trader.

One useful pattern that doesn’t seem to get talked about as much as others is the green spinning top candlestick, which is a formation that’s a neutral pattern indicating indecision among traders that could lead to a reversal at the end of a downtrend. It’s a good pattern to add to your toolkit, as it can pay off if your execution is on point.

Green Spinning Top Candlestick Pattern Explained

The green spinning top is a candlestick formation in which the real body is small, but the stock had a wide trading range. In other words, the closing and opening prices are relatively close, in relation to the movements between high and low price.

If there is a green spinning top at the end of a downtrend, it can indicate that the bears are losing the battle and may look to close out. Therefore, the green spinning top could show that a bottom is about to form and that the stock might be preparing to reverse. As a result, this trend may be referred to as a bull spinning top, as it indicates a potential turnaround for the stock.

Here’s an example:

Source: TradingView

In this daily chart on Facebook Inc. (FB), the stock clearly was in a downtrend with the potential to form a bottom at the support area around $115. Within this downtrend, Facebook formed a green spinning top pattern, indicating a potential reversal.

Look at what happened after the green spinning top: the stock trended higher above $150 in just a matter of a few months, marking a 30-plus percent gain from the $115 level. Facebook was a good example of a spinning top doji that offered impressive gains for those who invested in it.

The Bottom Line

Look for green spinning tops when you think a reversal might be in the cards for a security. Like all technical indicators, it’s not a foolproof pattern, but if you use it in conjunction with other technical tools like support lines, you’ll be a more-informed trader, ready to act in the early stages as a downtrend ends.

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   Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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