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The On Neck pattern is a two-candlestick pattern that is created by a tall down candle, followed by a much shorter up candle that gaps down on the open but then closes at or near the prior candle’s close.

The pattern is called “On Neck” because when the two closing prices are the same (or almost the same) across the two candles, it forms a horizontal line that can be viewed as a “neckline” or “neck”.

The price for both candles closed “on the neck”.

On Neck Pattern

The On Neck pattern is considered a continuation pattern

To identify the On Neck  pattern, look for the following criteria:

  • A downtrend must be in progress.
  • A tall black (bearish) candle must appear.
  • A smaller white (bullish) candle must follow the black candle.
  • The close of the white candle should nearly match the prior candle’s low. It should not rise higher than the black candle’s low price.
  • To confirm the On Neck pattern, look for a black candle on the third day, continuing the downward trend. A long body shows strength, as does a gap between the second and third days.

Meaning

The bears are in control of the market, and they continue their dominance with the On Neck pattern.

The first candle is bearish, continuing the downward trend, and although the next candle is bullish, it opens and closes beneath the first candle.

This movement suggests a continuation of the downtrend, so it is recommended that you continue to ride the trend.