In-Neck Candlestick Pattern

In-Neck Candlestick Pattern is a candlestick pattern that signals the continuation of a price downtrend. You may have encountered this pattern in financial trading at least once. However, it is not commonly used for trading due to certain drawbacks. Today's topic will help investors better understand what this pattern is and how to apply it.

KEY TAKEAWAY

• The In-Neck pattern is a bearish continuation pattern where the second candle opens below but closes at or slightly above the previous candle’s close, similar to the On-Neck pattern but with a higher close.
• The In-Neck pattern signals bearish continuation with a long bearish candle followed by a smaller bullish candle that opens lower and closes near the prior candle’s close.
• To trade the In-Neck pattern, wait for confirmation, enter short, set a stop-loss above the high, and consider volume and other indicators.
• The In-Neck pattern's second candle closes slightly above the prior close, suggesting stronger bearish continuation, while the On-Neck pattern’s second candle closes near or below the prior close, indicating potential continuation or pullback with a visible gap.

WHAT IS THE IN-NECK CANDLESTICK PATTERN?

The In-Neck pattern is a bearish continuation pattern during a downtrend, featuring a bearish first candle and a second candle that opens below but closes at or just above the prior candle's close, suggesting the downtrend will likely continue.

FEATURES OF IN-NECK CANDLESTICK PATTERN

The pattern forms during an established downtrend, reinforcing the bearish trend. The In-Neck pattern has the following features:

• First Candle: A long bearish candlestick with a substantial body that closes near its low, showing strong downward momentum.
• Second Candle: A smaller bullish candlestick that opens below the first candle's close, creating a gap, and closes at or slightly above the first candle's closing price.

There is a noticeable gap between the close of the first bearish candle and the open of the second bullish candle, highlighting the initial downward momentum and the subsequent rally attempt.

The pattern suggests that the bearish trend will likely continue. It is similar to the On-Neck pattern, but the key difference is that the second candle in the In-Neck pattern closes at or slightly above the first candle's close, while the second candle in the On-Neck pattern closes slightly below it.

The In-Neck pattern provides a bearish continuation signal by showing that despite a brief bullish attempt, the downtrend is expected to persist.

HOW TO TRADE WITH IN-NECK CANDLESTICK PATTERN?

To trade with in-neck candlestick, you need:

Confirmation

Ensure that the pattern is validated by the appearance of an additional bearish candle following the In-Neck pattern. This confirms the continuation of the bearish trend and provides stronger evidence for entering a trade.

Entry Point

Initiate a short position once the confirmation candle appears. This entry should be strategically timed to align with the expected continuation of the downtrend.

Exit Point

Place a stop-loss order just above the high of the In-Neck pattern. This precaution helps to minimize potential losses if the market moves against the position.

Trading Tips

• Patience: Allow the full formation of the pattern and wait for the confirmation candle before making any trading decisions. This approach reduces the risk of acting on incomplete signals.
• Volume: Higher trading volume accompanying the pattern can increase its reliability. Ensure the pattern is supported by significant market activity to validate its strength.
• Combine Indicators: Enhance the accuracy of the trade by using the In-Neck pattern in conjunction with other technical indicators. This multi-faceted approach provides a more comprehensive market analysis.
• While the In-Neck pattern can be a valuable tool for identifying bearish trends, it is not without its limitations. Effective risk management and consideration of the broader market context are essential for successful trading.

DIFFERENCES BETWEEN IN-NECK AND ON-NECK CANDLESTICK PATTERN

Differences between the in-neck and On-neck candlestick patterns:

Candle Closing Position

• In-Neck Pattern: The second candle closes slightly above the close of the previous candle.
• On-Neck Pattern: The second candle closes near or slightly below the close of the previous candle.

Pattern Type

• In-Neck Pattern: Generally considered a continuation pattern indicating a continuation of the bearish trend.
• On-Neck Pattern: Often signals a continuation of the downtrend or a possible pullback.

Bearish Continuation

• In-Neck Pattern: Stronger signal for bearish continuation.
• On-Neck Pattern: May indicate a short-term reversal or continuation.

Volume and Confirmation

• In-Neck Pattern: Confirmation with subsequent bearish candles is crucial.
• On-Neck Pattern: Confirmation can also include additional bearish confirmation, but it may also indicate a potential reversal.

Gap and Candle Size

• In-Neck Pattern: The second candle opens below the previous candle’s close but does not necessarily create a significant gap.
• On-Neck Pattern: Characterized by a visible gap between the two candles.

And that's all the information we've gathered about the In-Neck candlestick pattern. We hope this information will be helpful for you in making informed decisions in the volatile crypto market. For those new to the market, finding accurate and timely information can be challenging, so we recommend the Klarda app, a top choice with excellent features.