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 does not come as a surprise because it is a doji candlestick. It has a thicker real body and also can be found in consolidation areas. Look for price break above or below candle to confirm direction.
What Are Spinning Top Candlesticks?
Spinning top candlesticks are typically small candlesticks with a bigger real body that are found on stock charts near both support and resistance levels and signal indecision. The open and close is 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 more indecision the stock is in that day.
May look similar to long legged doji candlesticks when reading stock charts. That is why it is important not to get bogged down in the minutia. They may look similar and they also mean the same thing.
The spinning top candlesticks are indecision candles because the upper and lower wicks did not affect meaningful change in price. The bulls sent the price high and the bears sent the price low. Although 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 the day they form but end up being a sign of a significant trend reversal.
When spinning top candlesticks occur at the top of a bullish trend, the bulls are losing control. Buyers are losing momentum and the shorts are coming in.
Likewise, when the spinning top candlestick forms at the bottom of a bearish trend, the bears are losing control. The bulls are coming in to take the reigns. Sellers lose momentum as buyers coming to send the price up.
How to Trade Spinning Top Candlesticks
- Traders take a long position when 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 high as a stop
Spinning top candlesticks can form a the the top or bottom of a pattern signaling the end of a trend. Look to see what pattern it is apart of for confirmation of this reversal. If a spinning top candlestick forms at the end of a head and shoulders pattern, look out for a bearish reversal coming.
