Leavitt Brothers: Education - Candle Stick Patterns

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	Abandoned Baby
	Advance Block
	Belt Hold
	Breakaway
	Dark Cloud Cover
	Deliberation
	Doji Star
	Dragonfly Doji
	Downside Gap Three Methods
	Downside Tasuki Gap
	Engulfing
	Evening Doji Star
	Evening Star
	Falling Three Methods
	Gravestone Doji
	Hanging Man
	Harami
	Harami Cross
	Identical Three Crows
	In Neck
	Kicking
	Meeting Lines
	On Neck
	Separating Lines
	Shooting Star
	Side By Side White Lines
	Three Black Crows
	Three Inside Down
	Three Line Strike
	Three Outside Down
	Thrusting
	Tri Star
	Two Crows
	Upside Gap Two Crows

Hanging Man

Pattern: reversal
Reliability: low/moderate

Identification
A small real body forms at the upper end of the trading range with a long lower shadow (the longer the more bearish) with no, or almost no upper shadow.

The Psychology
In an uptrend or within a bounce of a downtrend, a sharp intraday sell-off is followed by a reversal which causes the stock to close near its opening price near the day's high. Although the stock recovers from its intraday sell-off, it suggests the bulls are starting to lose strength, and a reversal may occur. The pattern is a slightly more reliable if the real body is black. A weak following day on solid volume is still needed to confirm the pattern.

The bearish Hanging Man is similar to the bullish Dragonfly Doji and bullish Hammer.

Bearish Hanging Man candles form very often so you need to use other indicators to confirm potential moves. Here BBBY formed a Hanging Man candle that was followed up by a bearish Engulfing stick. That's a good one-two combination to play.

After making a higher high DPH formed a bearish Hanging Man candle on strong volume and was followed a filled candle that confirmed the reversal of the uptrend.

Here is a bearish Hanging Man candle that would be best used to exit a long position rather than as a short entry. The stock is simply too strong to short unless you are a very slick short term trader.

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