Hanging Man
The Hanging Man is a bearish candlestick pattern that indicates a potential reversal at the end of an uptrend. It's called a "Hanging Man" because the pattern looks somewhat like a man hanging with his legs dangling.
Here's a breakdown of the Hanging Man pattern:
The pattern consists of a single candlestick with a small upper body, little or no upper shadow (or wick), and a long lower shadow. The long lower shadow should be at least twice the length of the body, which suggests that sellers pushed the price significantly lower during the time period, but buyers were able to push the price back up to near the opening price.
The color of the body is not as important in this pattern, but a red or black body is considered more bearish than a green or white body.
The Hanging Man pattern appears during an uptrend. The long lower shadow shows that selling pressure is increasing, but the fact that buyers were able to push the price back up to near the opening price shows that buyers are still fighting.
Confirmation of the pattern's bearish signal comes if the next candlestick after the Hanging Man is bearish and closes below the Hanging Man's close. This would suggest that the sellers have taken control and that the uptrend may be about to reverse.
As with all candlestick patterns, the Hanging Man should be used in conjunction with other forms of technical analysis for confirmation. Traders often look for other signs of a potential reversal, such as an increase in selling volume or bearish signals from technical indicators.
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