Today’s signal – Trading the Belt Hold Pattern – Reversal Signal
The belt hold is a reversal signal and its lines are formed by single candlesticks. The bullish belt hold is a long white or green candle that has gapped down in a downtrend. It moves higher for the rest of the day from its opening point (which is called a white opening shaven bottom or white opening maruboza). The bearish belt hold is just the opposite and is formed with a severe gap away from the existing uptrend. It opens at its high and immediately backs off for the rest of the day (which is known as a black opening shaven head or black opening maruboza). Belt hold comes from the sumo wrestling term, Yorikiri, which means to push your opponent out of the ring while holding onto his belt. The longer the body of the belt hold, the more significant the reversal signal is.
Criteria
- The candlestick body should be the opposite color of the prevailing trend.
- It significantly gaps open which continues the trend.
- The real body of the candlestick has no shadow at the open end. The open is the high or low of that trend.
- The length of the body should be a long body. The greater the length of the body, the more significant the reversal signal is.
Signal Enhancements – The longer the length of the body, the more significant the reversal pattern is.
Pattern Psychology
After a strong trend is in effect the trend is further promoted by a gap open. This gap is typically a large gap. The opening price gets to a point and then immediately moves back in the direction of the previous close. This makes the opening price the high or the low for the trend. This causes concern however and you will see investors begin to cover shorts or sell outright. This starts to accentuate the move and as a result the existing trend reverses.
Continue to learn about more candlestick patterns to see how it can greatly improve your profits! Primary candlestick patterns should be understood first (such as the doji and hanging man patterns). Once you have a basic understanding of the primary signals, then move onto the secondary candlestick signals.
