There are famous candlestick patterns for price action analysis. Traders often rely on them. Matching high is one such candlestick pattern. The Matching high is a double candlestick bearish reversal pattern that builds in an uptrend and indicates that the current uptrend may be over. As for its form, a matching high consists of two positive candlesticks but closes at the same price. The matching high pattern indicates that the buying trend is ending, and sellers are preparing to devalue a particular currency.
Building Matching High Candlestick Pattern
The Appearance of the First Candle:
The first candle appears in an uptrend position; the body is white. It has no upper shadow. It looks like a long line.
The Appearance of the Second Candle:
The second candle has no upper shadow and a white body. The opening price is higher than the previous open price. The closing price is equal to the previous closing price. The first line of the pattern appears as a long line, but the second line can also be long or short. Both candlesticks must close at the same level. Also, the starting point of the second candle should be higher than the starting point of the previous candle. The matching high belongs to a group of bullish reversal patterns whose appearance on the chart will be confirmed by the next candle. The best confirmation is a black candle whose closing price is lesser than the opening price of the first pattern line.
Identification of the Matching High Candlestick Pattern
A matching high candlestick pattern contains two bullish candlesticks with gaps. Here are the points through which we can identify the matching high candlesticks.
- The first candle will form at the top of the chart. This will be a large bullish candle.
- The second body opens with a gap and ends at the same level as the body that closed the previous one. It opens above the opening price of the previous candle.
The structure of a Matching High Candlestick Pattern is very simple. However, they are not easy to spot on the chart as they are rare candlestick patterns that mainly form in stocks and indices.
Meaning of Matching High
Candlestick patterns represent market data. Market data is the conclusion of the overall sentiment of all market participants. Candlestick patterns can be very helpful in determining what is happening in the market and where it is headed. It’s almost impossible, but you can find clues by looking at the big picture. When the matching top appears, the market sentiment is mostly positive.
Market participants remain hopeful that prices will continue to rise. Therefore, buying pressure wins and tries to push the market up. Here the first candle is created. However, after a while in the uptrend, the market sentiment turned more negative as many market participants were concerned that the market had become overbought. As a result, very few people choose to close their positions to take profits, which will create a massive sell-off in the market, causing the price to drop.
Still quite bullish, the market tries to recover from the drop but fails to break above the previous bar’s close. After observing that the market was forming a negative gap and not being able to break through the previous close, many people decided to exit the market. The selling pressure was increasing, and soon the market entered a full downtrend.
Examples of Matching High
Following are examples of Matching High patterns:-
Information Matching High Apprises to the Traders
There is always a psychological process behind every candlestick pattern that informs the mission of institutions and traders. According to the price chart, the formation of a large bullish candle at the top of an uptrend shows that buyers are crowding out sellers. Successful with the first bullish candle, the second candle will move with a gap below and above the starting price of the previous candle.
When a gap suddenly appears, it indicates that there is strong selling momentum from the key level. The fact that the second candle failed to reach new high shows that the buyers were unable to break the base level created by the sellers. At this point, sellers control the market, and the price will go down.
Trade with the Matching High Candlestick Pattern
Although a matching high is generally considered a bearish reversal, this model is not enough for traders to enter trades. Traders should add additional confirmations or filters to ensure the difference is in their Favor when entering a trade. Seller activity is the only parameter for conditions and filters.
Volume Condition
Volume is a great way to eliminate bad trades and improve a consistent top-like pattern. Price charts reveal how the market has performed; volume indicates how many market participants have been involved in shaping the market move. This is a great source for evaluating the theory behind a market move. We keep coming back to some good working conditions for trading strategies while using volume.
Oversold and Oversold Readings
A very powerful concept of a stock is to observe overbought and oversold levels.
Because actions are mean regressive in nature, that means they make excessive movements in all directions intending to self-correct. Moving high in the market means it is overbought, and moving lower means it is oversold.
Seasonality
We can improve our returns by looking at seasonal market trends. The reality is that the market doesn’t always go up or down. We can see that there are repeating patterns where the market is more often bearish. For example, the market may be more upbeat on Tuesday than Wednesday. If we have these trends right now, we can use them to our advantage in trading.
Trading Strategies for Matching High Candlestick Patterns
The following trading strategies are not intended for live trading. These are guidelines for developing trading strategies using Matching High Patterns. Results may vary by time and market. These trading strategies are:
- High Match with confirmation
- High Match with spread claim
If the matching high is a reversal pattern, the market will remain uptrend on many occasions. To reduce the number of false signals, we can try some additional confirmations.
One of the key segments of a consistent high pattern is the negative space between the two candles. The area of the gap has a significant effect on performance.
Best Positions to Trade with Matching High Patterns
To win a candlestick pattern, we need to add different technical tools.
These tools are:
- Resistance Area
- Overbought conditions
Conclusion
The matching high candlestick pattern is a bearish double candlestick reversal pattern formed in an uptrend position. The first candle has a white body with no upper shadow. It looks like a long line. The second line can be short.
This article also explains how to identify the right high candlestick patterns, what is the meaning of matching high patterns, how to do trading with the right high candlestick patterns and the best strategy to trade with, and what the suitable high candlestick patterns.
