What is a 'Stick Sandwich'

A stick sandwich is a technical trading pattern in which three candlesticks form what appears to be a sandwich on a trader's screen. Stick sandwiches will have the middle candlestick oppositely colored of the candlesticks on either side of it, both of which will have a larger trading range than the middle candlestick. Stick sandwich patterns can occur in both bearish and bullish indications.

BREAKING DOWN 'Stick Sandwich'

In a bearish stick sandwich, the outside candlesticks will be long green candlesticks, while the inside candlestick will be shorter and red, and will be completely engulfed by the outside sticks. A bullish stick sandwich will look pretty much the same but with the opposite color and trading patterns as the bearish sandwich. Traders typically will take cues from the closing prices of the third candlestick when deciding to take bullish or bearish positions.

Although recognizing a stick sandwich pattern is not overly difficult, because they can present themselves during a bull and bear market, traders must be careful to take note of the colors involved. Basic criteria include accounting for the color of candlesticks on both sides, as well as the color of the candlestick sandwiched in the middle. After this pattern is recognized, traders consider a bearish sandwich to run green-red-green, and a bullish sandwich to run red-green-red.

The theoretical rationale behind the stick sandwich approach is that when the market is testing new lows, it will produce a red day. The following day will unexpectedly open higher and will trend higher all day, closing at or near its high. This movement hints at the reversal of a downtrend, and most short traders will proceed carefully. Then on the next day, prices open even higher, which accelerates shorts covering initially. However, prices then drift lower to close at the same level as two days prior. Savvy traders will take note of the support price implied by the two same level closes.

RELATED TERMS
  1. Evening Star

    An evening star is a bearish candlestick pattern consisting of ...
  2. Piercing Pattern

    A piercing pattern is a technical trading signal that is formed ...
  3. Real Body

    The real body is the wide part of a candle in a candlestick chart ...
  4. Previous Close

    Previous close is a security's closing price on the preceding ...
  5. Upside Gap Two Crows

    Upside gap two crows is a bearish market reversal signal in technical ...
  6. Morning Star

    A morning star is a bullish candlestick pattern in a stock's ...
Related Articles
  1. Retirement

    Financial Challenges of Club Sandwich Generation

    The Club Sandwich Generation faces unique financial burdens.
  2. Insights

    The 6 Worst Menu Items McDonald's Has Ever Served (MCD)

    From the Hula Burger to McPizza, these 6 menu items were a total flop.
  3. Trading

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  4. Trading

    Significant Marubozu Candlesticks

    This candlestick pattern can signal a big move, especially if it occurs in the right context. With the context right and pattern present, some big name stocks could see a major move over the ...
  5. Investing

    Whole Foods on the Hot Seat Over Pricey Sandwich

    Remember Whole Foods Market's (NASDAQ: WFM) asparagus water embarrassment last year? The natural foods grocer was widely mocked for selling bottles of water with three asparagus stalks in them ...
  6. Trading

    Day Trading for Beginners

    Interested in day trading but don't know where to start? Here are some common day trading strategies, as well as some day trading tips for beginners.
  7. Personal Finance

    Top 5 Books to Become a Forex Trader

    These books are some of the best resources to learn about forex trading, covering everything from the basics of currency trading to advanced trading strategies.
  8. Trading

    How to become a successful forex trader

    Discover a framework that will help you build your own profitable forex trading strategy.
  9. Investing

    Five Reasons Not To Bite Into Potbelly's IPO

    Potbelly Corporation set the terms for its IPO September 23. If you include the underwriters over-allotment, the Chicago-based sandwich shop is selling 8.49 million shares to the public at between ...
RELATED FAQS
  1. What do the different colored candlesticks mean?

    A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. Read Answer >>
  2. What Do You Call a Candlestick With No Shadows?

    A candlestick with no shadow is seen as a strong signal of conviction by either buyers or sellers. Read Answer >>
  3. How are Shooting Star patterns interpret by analysts and traders?

    Learn what the shooting star candlestick formation is and the reasons traders and market analysts commonly interpret it as ... Read Answer >>
  4. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  5. How do traders interpret a Dragonfly Doji pattern?

    Read about a rare but significant candlestick chart pattern: the dragonfly doji. Learn what a dragonfly doji says about a ... Read Answer >>
  6. What are the best technical indicators to complement the Moving Average Convergence ...

    Learn the best technical indicators to use as part of a trading strategy in conjunction with the moving average convergence ... Read Answer >>
Trading Center