What Is a Thrusting Pattern?

A thrusting pattern is a type of price chart pattern used by technical analysts. It is formed when a black candle is followed by a white candle meeting particular criteria.

Thrusting patterns are generally considered to be a bearish continuation pattern. However, evidence suggests that they can also signal a bullish reversal. Therefore, the thrusting pattern is best used in combination with other trading signals.

Key Takeaways

  • Thrusting patterns are closely watched by technical analysts.
  • They are generally thought to predict the continuation of a bearish trend, although the evidence is mixed in this regard.
  • Thrusting patterns are most useful when combined with other types of evidence.

Understanding Thrusting Patterns

A thrusting pattern occurs when a black candle is followed by a white candle, and where the position of the white candle is above the black candle's close but below its real body midpoint.

The general interpretation of the thrusting pattern is that it reflects bulls' attempts to intervene in a predominantly bear market. The failure of the white candle to break out above the black candle's midpoint suggests that the bulls lack the strength to reverse this bearish trend. Therefore, most traders believe that the thrusting pattern signifies a continuation of the downtrend, as the bulls will eventually give up their rally attempt.

There is, however, contrary evidence as well. Statistical analyses of the thrusting pattern have shown that it is also often followed by a bullish reversal. In fact, some analyses have shown that this outcome—a bullish reversal—actually occurs more often than a bearish continuation. Because of these mixed results, traders should avoid making decisions based on the thrusting pattern unless other supporting evidence is also available.

Technical Anlysis

The thrusting pattern is one of many chart patterns used in technical analysis, a discipline of investing based on analyzing the past and present price history of a security. Because technical analysis focuses on price movements, as opposed to the fundamental characteristics of the security in question, the techniques of technical analysis can be applied across a wide range of asset classes. Apart from technical analysis, the other major approach to investing is fundamental analysis, which is associated with value investors like Warren Buffett and Benjamin Graham.

Real World Example of a Thrusting Pattern

To understand the thrusting pattern, consider the following illustration:

As you can see from this image, a thrusting pattern occurs when a black candle is followed by a white candle, but only if the white candle closes above the black candle's close but below its real body midpoint.

Experienced traders will note that the thrusting pattern is similar to the "in neck" and "on neck" chart patterns. However, the thrusting pattern is unique because of the fact that its white candle must close above the close of the black candle. Similarly, the thrusting pattern is similar to but distinct from the piercing pattern, in which the white candle closes above the midpoint of the previous black candle.