|
Written and copyright © 2008-2009 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts  , pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The stick sandwich is a wonderful name for this candle pattern, thank you very much! But I had nothing to do with naming it, of course. The candlestick is supposed to act as a bullish
reversal in theory, but actually performs as a bearish continuation most often. It has a frequency rank of 59, and that means you should be able to see several examples along your
daily commute to work. The overall performance rank is quite high and that speaks of a trend that, well, trends.
Important Results
|
Theoretical performance: Bullish reversal
Tested performance: Bearish continuation 62% of the time
Frequency rank: 59
Overall performance rank: 14
Best percentage meeting price target: 67% (bull market, up breakout)
Best average move in 10 days: 7.43% (bear market, up breakout)
Best 10-day performance rank: 11 (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.
|
 Stick Sandwich
|
Discussion
The stick sandwich is supposed to be a bullish reversal, as I mentioned, but testing shows it acts as a bearish continuation 62% of the time. The overall performance rank is 14th
and that tells me the price trend after the breakout is a good one. Drilling down into the numbers shows that the stick sandwich shines after an upward breakout, but the results from
downward breakouts (after 10 days, that is), is lousy. If you ignore the 10 day limitation on the trend, reversals (upward breakouts) outperform downward ones.
The best average move 10 days after the breakout is a rise of 7.43% in a bear market. That ranks 11th for performance. I consider moves higher than 6% to be good ones, so this candle
does well.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Three. |
| Price trend leading to the pattern | Downward. |
| Configuration | Look for a black candle in a falling price trend. The second candle is white and it trades above the close of the prior day. The last candle is a black one that closes at or near the close of the first day. |
Three Trading Tidbits
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.
- The position of the closing price helps detect reversals of the downward price trend -- page 716.
- Buy the stick sandwich as part of a downward retrace in an upward price trend -- page 715-716.
- Patterns within a third of the yearly low tend to act as continuations most often -- page 716.
Example
The stick sandwich appears on the daily chart circled in red. Price trends downward into the first black candle, which happens to be a tall
one in this example. Following that is a white candle that trades above the close of the prior day. The last candle in the triplet is another black candle that closes at or near
the close of the first day.
This stick sandwich has price trending downward into the pattern and eventually price breaks out downward, too, meaning this stick sandwich is a bearish continuation pattern.
A downward breakout occurs
when price closes below the bottom of the candlestick pattern. Here, that takes about a week before that happens, but happens it does and price resumes the downtrend at about the
same velocity at which it entered the candle.
Since stick sandwiches that reverse the downward price trend post better moves, that is the way to trade this candlestick. Look for an upward primary trend and a stick sandwich to
appear as part of a downward retrace. That is not the setup shown in the chart.
-- Thomas Bulkowski
|
. If you buy ANYTHING, they pay for the referral.
on 
