What Is Matching Low

The matching low is a two-candle bullish reversal pattern that appears on candlestick charts.

Breaking Down Matching Low

The matching low pattern is a two-candle bullish reversal pattern with the following characteristics:

  • The market is trending lower.
  • The first candle has a long black real body.
  • The second candle has a black real body that closes at about the same price level as the close of the first candle.

The theory behind the pattern: the failure of the second candle to close below the first candle's close generates a support level for a bullish reversal. Bulls are likely to attempt a rally using the support level and could overwhelm the bears, creating a new trend higher. The pattern performs best in temporary downturns following larger-scale uptrends rather than during times when price is trending lower over several timeframes.

Traders should look for a rebound in the price following the matching low pattern, while using the prior day’s close as a support level – or potentially a stop-loss point – for the position. However, it’s important for traders to look for other signs of a reversal rather than relying exclusively on the matching low because it doesn’t have the best predictive abilities.

The inverse of the matching low pattern is the matching high pattern that signals a bearish reversal during an uptrend.

Matching Low Trader Psychology

The market is engaged in an active downtrend, building bearish energy while bull confidence slumps. The first candle closes lower than the open, with a large real body, indicating that sellers took control early in the session and maintained control into the closing bell. This trend further increases bearish energy while keeping bulls in the defensive, due to the lack of buying power. However, the security gaps higher on the second candle, reaching into upper half of the first candle's real body. This price action shakes bear confidence while increasing bullish resolve. 

Bears take control after the opening print of the second candle, dropping price back to the close of the first candle. Their failure to post a lower low into the close indicates decreased selling power while establishing a support level at the closing ticks of the first and second candles. However, bull power remains weak, discouraging new positions into the closing bell. That could change in the next few sessions, with a higher opening demonstrating renewed bull strength that needs confirmation through a fourth or fifth candle rally day.