Bullish neck lines are an extremely rare but nonetheless strong indicator that a current bullish trend will continue. These candlestick patterns can come in two different varieties: the in neck lines and the on neck lines. However, these two different patterns share a similar shape as well as other common factors. Both begin with a tall white candlestick that has a long upper wick and little or no lower wick. The second day has a black wick that begins far above the previous day’s close but ends up at or within the first day’s body. This candlestick is a Black Closing Marubozu, which is marked by having a long black body along with either a very small wick or none at all. The price drop during this day often worries people who are new to capital investing, because they are betting money that the stock will continue to increase in price.
The key difference between in neck lines and on neck lines is where the second day finishes. With in neck lines, the day closes within the first day’s body. With on neck lines, the body of the second day’s candlestick just meets that of the first.
Both the bullish in neck line and on neck line candlestick patterns appear to be a reversal of the trend. However, they only rarely signal a change in direction. Quite to the contrary, both types of neck lines usually mean that the current trend will continue. While the bears muster up strength to pull down the price temporarily, there was no net loss and the uptrend will likely continue on the next trading day. In neck lines may be more indicative of a change in direction, but they are most likely to signal a continuation trend.
Your Next Move
Because both kinds of bullish necklines are a continuation pattern, your best bet as an investor is to assume that the current bullish trend will continue. Your best bet is to stay with the charted course, because there is likely smooth sailing ahead. If you feel that a turnaround may be imminent, it’s best to wait for confirmation.
As with all indicators, it is best to wait for confirmation before making any big decisions. Waiting for confirmation in this case means watching what happens on the third day and beyond. If the bullish trend seems to recover momentum, you will know that this is indeed a continuation. If you monitor the market performance for several days and it seems like the bears are taking over, despite the odds, then you can react accordingly.
There are a few patterns that mimic bullish neck lines, but none so much as bearish meeting lines. both days have long bodies and, usually, short wicks. The key difference, however, is that bearish meeting lines have a less restricted range on the second day. It’s important to know the difference because there are very different outcomes predicted by these two candlestick patterns.