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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski’s Short Black Candle

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Busted
Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/24/2017
21,513 -66.90 -0.3%
9,428 -43.07 -0.5%
719 -6.46 -0.9%
6,411 23.06 0.4%
2,470 -2.63 -0.1%
YTD
8.9%
4.2%
9.0%
19.1%
10.3%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
740 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

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You might think that the short black candlestick would be as plentiful as birds at a feeder, but it is a rare pattern (by my definition, anyway). Using four databases holding 4.7 million candle lines, I dug up just 5,593 of them, which is a lot, but nothing near the tens of thousands that I expected.

There is nothing really remarkable about the short black candle. It acts as a reversal almost randomly, and price does not trend far after the breakout.

Important Results for Short Black Candle

Theoretical performance: Reversal or continuation
Tested performance: Reversal 52% of the time
Frequency rank: 50
Overall performance rank: 66
Best percentage meeting price target: 95% (up breakout)
Best average move in 10 days: 3.61% (bear market, up breakout)
Best 10-day performance rank: 49 (bear market, up breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

The ideal short black candle candlestick
Short Black Candle
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Short Black Candle Discussion

The 52% reversal rate is what I call near random, meaning you will probably not be able to tell the breakout direction ahead of time. The frequency rank is 50, almost in the middle of the 103 candle varieties I looked at. Price performance over 10 days ranks it 66, also far down the list of best performers.

Since the candle is short, the price trend after the breakout almost always meets the measure rule target (the candle height added/subtracted from the up/down breakout price, respectively). The best move after the breakout over the coming 10 days averaged just 3.61%, which is well below the 6% to 9% that the best performers show and it places the rank at 49.

Short Black Candle Identification Guidelines

CharacteristicDiscussion
Number of candle linesOne.
Price trend leading to the patternNone required.
ConfigurationLook for a short black candle with shadows (upper and lower) that are shorter than the height of the body.

Three Trading Tidbits for Short Black Candle

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

  1. Short black candles taller than the median show price that moves almost twice as far after the breakout as those shorter than the median -- page 157.
  2. Short black candles with shadows longer than the median tend to outperform after the breakout -- page 157.
  3. Price breaks out downward from the candle most often -- page 159.

The short black candlestick on the daily scale

Short Black Candle Example

The chart shows a short black candle on the daily scale with a downward breakout. The candle appears as part of a retrace of an uptrend. Taking a wider view, the candle position in the surrounding price landscape reminds me of a mat hold candle pattern. Two days before the short black candle at A is a tall white candle followed by several candles that retrace that uptrend and then two tall white candle resume the upward move. Although the mat hold is a five line candle, these types of measured move up patterns always seem to catch my attention. They represent good short-term moves.

-- Thomas Bulkowski

 

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Jesus saves. He uses double coupons.