Last Engulfing Top Candlestick Pattern

In the world of technical analysis, candlestick patterns are a popular tool for traders to identify potential trend reversals and make informed trading decisions. The Last Engulfing Top Candlestick Pattern is one such pattern that can signal a potential reversal in an uptrend.

In this article, we will delve into the workings of this pattern, its characteristics, and how it can be used to make better trading decisions. Whether you’re a seasoned trader or just starting, understanding the Last Engulfing Top Candlestick Pattern can help you make more informed trading decisions.

What is the Last Engulfing Top Candlestick Pattern?

The Last Engulfing Top Candlestick Pattern is a two-candle pattern that forms during an uptrend. The first candlestick is a bullish candle, which is followed by a larger bearish candle that completely engulfs the previous candle’s body. This pattern may act as a bearish continuation or a bullish reversal pattern.

Last Engulfing Top Candlestick Pattern
Last Engulfing Top Candlestick Pattern

However, Confirmation of the pattern occurrence needs to be confirmed on the following candles. If the following candles continue to show bearish behavior and break below the recent low, it confirms a bearish reversal pattern. But if the following candles show bullish behavior and break above the recent high, it confirms a bullish continuation pattern.

Last Engulfing Top Candlestick Pattern Strategy

To utilize the Last Engulfing Top Candlestick Pattern for trading decisions, traders may start by identifying the pattern on the chart during an uptrend. This pattern occurs when a bullish candle is followed by a larger bearish candle that completely engulfs the previous candle’s body. This pattern suggests a potential reversal of the uptrend and a potential downtrend ahead. However, confirmation of the pattern occurrence needs to be confirmed on the following candles.

Once the pattern is identified, wait for confirmation on the following candles. If the following candles continue to show bearish behavior and break below the recent low, it confirms a bearish reversal pattern. This signals that the sellers are taking control, and a potential downtrend is likely to continue. In this case, traders may enter a short position, set a stop loss above the recent high, and take profits at the next support level.

Alternatively, if the following candles show bullish behavior and break above the recent high, it confirms a bullish continuation pattern. This signals that the buyers are still in control, and the uptrend is likely to continue. In this case, traders may enter a long position, set a stop loss below the recent low, and take profits at the next resistance level.

It’s important to note that the Last Engulfing Top pattern is not a guaranteed indication of a reversal or continuation. Therefore, it’s essential to confirm the pattern occurrence on the following candles and use appropriate risk management techniques to minimize losses.

Buy Signal

Last Engulfing Top Candlestick Pattern Buy Signal
Last Engulfing Top Candlestick Pattern Buy Signal
  • Wait for an uptrend to occur.
  • Identify a bullish candle followed by a larger bearish candle that completely engulfs the previous candle’s body. This is the Last Engulfing Top Candlestick Pattern.
  • Wait for confirmation of the pattern occurrence on the following candles. If the following candles continue to show bearish behavior and break below the recent low, it confirms a bearish reversal pattern.
  • Enter a short position when the above requirements are met.
  • Set a stop loss above the recent high or according to your money management strategy.
  • Take profits at the next support level.

Sell Signal

Last Engulfing Top Candlestick Pattern Sell Signal
Last Engulfing Top Candlestick Pattern Sell Signal
  • Wait for an uptrend to occur.
  • Identify a bullish candle followed by a larger bearish candle that completely engulfs the previous candle’s body. This is the Last Engulfing Top Candlestick Pattern.
  • Wait for confirmation of the pattern occurrence on the following candles. If the following candles show bullish behavior and break above the recent high, it confirms a bullish continuation pattern.
  • Enter a long position when the above requirements are met.
  • Set a stop loss below the recent low or according to your money management strategy.
  • Take profits at the next resistance level.

Last Engulfing Top Candlestick Pattern Pros & Cons

Pros

  • The Last Engulfing Top Candlestick Pattern can be a strong bearish reversal signal, indicating that the uptrend may be coming to an end and that a new downtrend may be starting.
  • This pattern is relatively easy to identify on a price chart and can be used in conjunction with other technical indicators to confirm a trend reversal.

Cons

  • The Last Engulfing Top Candlestick Pattern is not a guaranteed indication of a trend reversal and can result in false signals. Traders should use other technical analysis tools to confirm the pattern.
  • This pattern can occur at any point during a trend, making it difficult to identify whether it’s the start of a new downtrend or just a temporary retracement.
  • The bearish candle may also indicate a temporary retracement rather than a trend reversal, so traders should be cautious and monitor the price action for confirmation before entering a trade.

Conclusion

The Last Engulfing Top Candlestick Pattern is a trading pattern for identifying potential trend reversals in an uptrend. As with any trading strategy, it’s important to use appropriate risk management techniques and confirm the pattern occurrence on the following candles. By understanding the characteristics and signals of this pattern, traders can make more informed decisions and potentially minimize losses.