Reverse Form: Whale Swallow

There is a saying in the stock market: “One line of the sun, meet thousands of thousands of thousands of people.”

Simply put, when a solar line appears, the previously suppressed bullish sentiment can erupt, spurring the movement to move higher.

However, market changes are measured, and only one K-line is sure to move forward, not without too much volatility. In real life, investors often use the K-line shape as an entry point and combine other factors to better judge market trends.

This article will introduce you to a classic double K-line form — the Whale Swallow Form.

What is Whale Swallowing Form?

THE WHALE SWALLOW FORM CONSISTS OF TWO K-LINES. AS THE NAME IMPLIES, THE SOLIDS OF THE FIRST K-LINE ARE COMPLETELY “SWALLOWED” BY THE SOLIDS OF THE SECOND K-LINE.

THERE ARE TWO TYPES OF WHALE SWALLOWING PATTERNS, THE BULL WHALE SWALLOWING FORM AND THE BEARISH WHALE SWALLOWING FORM, BOTH OF WHICH ARE EXACTLY THE OPPOSITE.

The first K line in the bull whale swallow form is the sine line and the second K line is the sun line. When the bullish whale swallow pattern appears at the bottom, it is usually predicted that the movement will reverse to bullish.

In contrast, the first K line of the bearish whale swallow pattern is the sun line and the second K line is the negative line, which usually predicts that the trend will reverse to a fall.

How are whale swallows formed?

The bull whale swallow pattern usually appears at the bottom of a bearish position.

The first K-line of this form is a negative line, indicating that the market continues its previous bearish behavior.

The second K-line is the Yaw line, whose opening price is lower than the closing price of the first K-line, but the closing price is higher than the opening price of the first K-line.

This means that it is deeper, as the second solar line hints that the bulls have digested the selling pressure of the market, thus allowing one to see the possibility of the transaction “going upside down”.

THE BULLISH WHALE SWALLOW PATTERN HAS NO HARDNESS, BUT GENERALLY SPEAKING, THE UPPER SHADOW LINE OF THE SECOND K-LINE IS OFTEN SHORTER, INDICATING THAT THE STOCK PRICE STILL HAS SOME UPWARD MOMENTUM AT CLOSING.

If the K line on the next trading day falls above the bullish whale swallow pattern, the bullish signal is expected to be further confirmed.

The formation process of the bearish whale swallow pattern is quite the opposite and usually appears at the top of bullish sentiment.

How to Identify Whale Swallowing Patterns?

In real life, investors can pay attention to the following key points to better identify whale swallowing patterns.

• Behavioral Trends

The bull whale swallow pattern usually appears at the bottom of the trade, while the bearish whale swallow pattern appears at the top.

• First K-line

The first K line of the bull whale swallow pattern should be the negative line, and the bearish whale swallow form should be the sun line.

• The second K line

The color of the second K-line should be different from the first K-line, and the solids of the second K-line should be larger and can completely cover the solids of the first K-line.

• Form Confirmation

The main basis for morphological confirmation is to look at the closing performance of the next K line. For the bull whale swallow pattern, the bullish signal is more reliable if the next K line falls, the bearish signal is also more reliable if the next K line of the bearish whale swallow pattern falls.

CASE ANALYSIS

The figure below shows a bullish whale swallowing pattern in the Chevron (CVX) share price on the daily chart.

• As shown in the diagram, a bullish whale swallowing pattern appears at the bottom of the transaction after the stock price has fallen for several days in a row.

• The first K-line of this pattern is a negative line, indicating that there is still some selling pressure in the market, pushing the share price further lower.

• The second K-line of the pattern is a solar line, with an opening price below the previous day's closing price, but the closing price is higher than the previous day's opening price, suggesting that market sentiment may be reversed by bearish to bullish.

• On the next trading day of a bullish whale swallow pattern, the stock price closed higher, giving further confirmation of the bullish signal.

summed

In sum, the whale swallow pattern is a double K-line reversal pattern that usually appears at the top or bottom of the market.

The bull whale swallow pattern helps investors to confirm potential bullish market signals, while the bearish whale swallow pattern is used to confirm bearish signals.

In real war, K-line shapes should be used in combination with other technical analysis tools to better aid trading decisions.