What are Spinning Top Candlestick?
It is a candlestick pattern with small real body with wicks of different sizes. It is a simple candlestick pattern made of a single candleline. They represent the areas of uncertainty.
They can occur any where on the chart. They may be at the end of an up trend or at the end of a down trend or they may appear here and there with in the trend.
They can have either a black body of white body.
The stock opens and moves in one direction to some extension. The perception of the market changes. So the prices moves in the opposite direction. At its extreme the perception again changes. The price moves towards the opening price and closes near it.
This results in a small body with a medium to long wicks.
After opening the prices hovers just around the opening price with a small range. At the end of the time period the stock closes near the open price.
This results in a small body and small wicks.
The closing may be above the opening price resulting in a white body or it might close below the open price causing a black body.
In any case the price does not move far from the open price. There is no trending move. This is expressed in the resulting small body.
Through out the time period the price does not make a trending movement. Even if it does make a trending movement, by the end of the session it comes back near the open price and closes near it. So no clear trend was exhibited in that time period.
The small body is the result of indecision among the traders, which ultimately proved to be neutral. In the tug of war between bulls and bears, no body won. Buyers buying power has neutralized the sellers selling power and sellers selling power has neutralized the buyers buying power.
This happens when both supply and demand are almost equal. That means the market is neutral or it has slowed down to decide the next movement.
This can happen near the support and resistance. This can happen when there is profit booking after a trending movement. This can happen at the overbought and oversold areas when the buyers and sellers get exhausted.
Spinning Top Candlesticks just mean indecision. When you reach a spinning top you also slow down. Wait and watch to see what happens next. The price may most likely continue its trend or it might reverse.
If there is one spinning top candle it means indecision. If there are many of them it means greater indecision. Trader should become alert full to take the next action.
Spinning tops are more important when they are part of other formations. They are turning points in Morning Star and Evening Star formation. When they are contained with in the previous candle's real body, they are part of Harami.
High Wave Candlestick are spinning tops with unusually long shadows and a small real body. Although the bulls and bears push the price to a greater extent, ultimately the price comes back and closes near the opening.
In a candle chart small real bodies are also seen in Candlestick Hammer, Hanging Man and Shooting Star candlestick patterns. Instead of closing near the opening and forming a small body, if the close is at the opening then we get a Doji.
Click the links below to learn about them.
There are many more simple candlestick patterns used in stock analysis. Some of them are listed below. You may click on the name of each pattern listed below to learn and understand more about them.