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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 On Neck

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Busted
Patterns
Candles Chart
Patterns
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Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

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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The on neck candlestick pattern is a peculiar name for a candle that does not work well as a continuation. Yes, it functions in theory as it does in reality, but the continuation rate is what I consider "near random." Once price breaks out, the trend is decent for upward breakouts, but not so good for downward ones.

On Neck Important Results

Theoretical performance: Bearish continuation
Tested performance: Bearish continuation 56% of the time
Frequency rank: 70
Overall performance rank: 33
Best percentage meeting price target: 64% (bear market, up breakout)
Best average move in 10 days: 8.32% (bear market, up breakout)
Best 10-day performance rank: 6 (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 on neck candlestick
On Neck
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On Neck Discussion

The on neck candlestick pattern is a two line candle with a downward price trend leading to it. A tall black candle is the first to appear followed by a white candle with a close that matches the prior low.

The pattern works in theory as it does in reality, that is, as a bearish continuation 56% of the time. I consider that "near random." The best average move 10 days after the breakout occurs in a bear market after an upward breakout. Price climbs 8.32% when a move of 6% is considered good. That gives it a very high 10-day performance rank of 6 (out of 103 candle types, where 1 is best).

On Neck Identification Guidelines

CharacteristicDiscussion
Number of candle linesTwo.
Price trend leading to the patternDownward.
ConfigurationLook for a tall black candle in a downward price trend. Following that, a white candle has a close that matches (or nearly matches) the prior low.
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Three Trading Tidbits for the On Neck

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. On neck candles that appear within a third of the yearly low perform best -- page 610.
  2. Select tall candles for the best performance -- page 610.
  3. On neck continuation candles occur most often within a third of the yearly low -- page 611-612.

The on neck candlestick on the daily scale

On Neck Example

The on neck candlestick pattern shown on the daily chart is circled in red. Price forms a tall black candle followed by a white candle. The closing price of the white candle is at or near the low of the black candle. Both appear in a downward price trend, as required.

In this example, the on neck breaks out downward two days after it completes in what looks to be a high wave candle (it would be a long legged doji or even a Rickshaw man but the body has a height and the shadows should be longer for a rickshaw man). The downtrend reverses there and moves up only to reverse and eventually continue moving lower, joining the primary down trend already in existence.

-- 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. I reached enlightenment, and all I got was this STUPID AURA.