Spinning top candlesticks are found on stock charts and could be a bullish or bearish reversal sign. A spinning top candlestick is a sign of indecision in the market. However, this is not surprising, as it is a doji candlestick. It has a thicker real body and can also be found in consolidation areas. Look for a price break above or below the candle to confirm direction.
What Is a Spinning Top Candlestick?
Spinning top candlesticks are typically small candlesticks with a larger real body found on stock charts near both support and resistance levels, signaling indecision. The open and close are wider than a doji.
Spinning top candlesticks have short, real bodies between long upper and lower wicks or shadows. Hence, the smaller the real body, the greater the indecision in the stock that day.
It may resemble long-legged doji candlesticks when reading stock charts. That is why avoiding getting bogged down in the minutiae is important. They may look similar, and they also mean the same thing.
These are examples of both bullish candlesticks and bearish spinning tops. Blue ones represent the bullish candlesticks, and the bearish ones are represented by orange ones. They resemble doji candlesticks but have a larger real body.
Spinning Top Candlestick Basics
The spinning top candlesticks are indecision candles because the upper and lower wicks did not affect meaningful price changes. The bulls sent the price high, and the bears sent the price low. Although the price still closed near where it opened that day.
Spinning top candles are no different. The indecision of the spinning top candlestick is a sign of an upcoming trend reversal.
Spinning tops may not mean anything on the day they form, but they signify a significant trend reversal.
The bulls are losing control when spinning top candlesticks occur at the top of a bullish trend. Buyers are losing momentum, and the shorts are coming in.
Likewise, the bears lose control when the spinning top candlestick forms at the bottom of a bearish trend. The Bulls are coming in to take the reins. Sellers lose momentum as buyers come to send the price up.
These candles also make up larger patterns that can be either bullish or bearish. Patterns such as bull flags, bear flags, ascending triangles, and descending triangles.
Spinning Top Candlestick Trading Strategy
- Traders take a long position when the price breaks above the high of the spinning top.
- Use a candlestick close below the low as a stop level.
- Take a short at the break of the low and use a close above the high as a stop.
Spinning Top Candlestick Examples
This is an example of two bullish spinning candlesticks on a weekly chart of $META. You’ll see that they occurred at the top of a rising wedge pattern. A major bearish engulfing pattern occurred when the price reached the apex of the rising wedge. This created a major downtrend and ultimately formed a falling wedge.
Once the price created a falling wedge pattern, the trend reversed and entered a rising wedge pattern. Many times, charts will consist of both rising and falling wedges. It’s important to find these patterns by drawing your trendlines. Top candlesticks will also form during these formations’ key pivot and reversal areas.
Uptrend Example
This is an example of spinning tops forming consolidation on a weekly chart of $META. Spinning tops can happen in uptrends, downtrends, and consolidation areas that form bull and bear flags. Also, bull pennants and bear pennants. Tops are fundamental to forming these flag and pennant formations. They also happen during pullbacks.
On this chart, you’ll see the spinning tops form the bull flag inside several rising wedges. The bigger pattern overall was a large rising wedge. Spinning tops can also resemble dojis. They both tell the same story of consolidation or pullback areas.
Downtrend Example
The picture above is a daily chart of $DKNG. This chart illustrates the formation of multiple spinning tops during a downtrend. Many times, traders will call a cluster of consolidation candles spinning tops even if they have a mixture of dojis, hammers, and hanging man’s. In these scenarios, it doesn’t matter what you call them, because they tell the story of consolidation.
This chart shows various-sized spinning tops found at both angular support and resistance levels, indicating a clearly defined downtrend. There were at least three peaks and valleys that made this downtrend especially effective. You’ll notice that the spinning tops formed near these important levels as well. This illustrated the tug of war between the bulls and bears, as they vied for control of price action.
Final Thoughts on Spinning Top Candlesticks
Spinning top candlesticks can form at the top or bottom of a pattern, signaling the end of a trend. To confirm this reversal, see what pattern it is a part of. If a spinning top candlestick forms at the end of a head and shoulders pattern, look out for a bearish reversal coming. Use proper risk management techniques when trading spinning top candlesticks.
Frequently Asked Questions
A spinning top is a short candlestick shape with a real body vertically centered between a long upper shadow and a shorter lower shadow. The shape of the candlestick symbolizes uncertainty about the asset’s future direction. This indicates that neither the buyer nor the seller has the upper hand.
The biggest difference between a hammer and a spinning top is that the spinning top has wicks and shadows. The hammer only has a shadow with no upper wick.
A spinning top can be bullish or bearish. They are found at the top of uptrends or downtrends. Usually, they signify consolidation areas before the trend reverses in the opposite direction.
