Comprised of three candles, the stick sandwich candlestick pattern is so named because the middle candle is always the opposite color of the first and third. This pattern is a bearish or bullish reversal pattern and establishes a new support or resistance level before price moves to establish a new trend.

The first candle in the stick sandwich chart pattern is a large candle in the direction of the current trend. Trading for this period closes near its high in a bearish reversal or near its low in a bullish reversal, leaving a very small upper or lower shadow, respectively. The second candle is in the direction of the reversal and indicates a strong push by opposition as it prepares to take control. The second candle gaps away from the close of the first candle in the direction of the reversal, reflecting the opposition's momentum. Price closes below the open of the previous session in a bearish reversal or above the open in a bullish reversal. The third candle completely engulfs the body of the second and closes at or very near the closing price of the first candle.

The opening gap and generous trading range of the second candle indicate the slow death of the current trend as the dominant force is unable to keep price contained after the aggressive open. The third candle establishes a new support or resistance level that further confirms the exhaustion of the prior trend. The dominant market force repeatedly tries and fails to push price beyond this point, indicating the current trend has reached its limit.

The stick sandwich pattern has only middling reliability, so awaiting confirmation from future price action is vital when creating effective trade strategy. Because this pattern is known to result in trend continuation rather than reversal, traders should wait for price to move beyond the newly established support or resistance level before trade entry.

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