Top reversal pattern: Gravestone Cross

Doji is a special candlestick pattern, its appearance, often indicating a roughly equilibrium of the long and short forces of the market.

However, if a doji appears in a clear uptrend, it is a noteworthy signal as it implies that the market may reverse.

This article will introduce a bearish reversal cross pattern - Tombstone Cross.

What is a Tombstone Cross?

Tombstone Cross is a single candlestick pattern that has roughly the same opening, low, and closing prices, but the maximum price is significantly higher than the other three prices.

Thus, the gravestone cross looks like an inverted “T” font: no visible lower shadow, but with a long upper shadow.

If the tombstone cross appears in an uptrend, it often means that the market may reverse from an upward to a fall.

How was the tombstone cross formed?

While gravestone crosses may appear in the shock city or downtrend, it is typical to form at the top of an uptrend, when long interest is weakened and the short gradually dominates.

On the day the tombstone cross appears, the stock price usually opens high and pulls up further in the intraday. This upward momentum indicates bullish sentiment of bulls continues to function in the market.

However, over time, sell-off pressure gradually increased, and the stock price trend turned. Although bulls once menacing pulled the stock price sharply, as of closing, the share price fell almost to the same position as the opening price, so a gravestone cross pattern with a long upper shadow appears on the candlestick chart.

Tombstone cross implies that the long are losing their advantage, and the short may soon dominate the market.

To confirm the bearish signal of the Tombstone Cross, you can wait until the next trading day. If the K line on the next trading day falls below the tombstone cross, it means that the market may reverse to a fall.

How to identify a tombstone cross?

In actual combat, investors can pay attention to the following key points to better identify the tombstone cross form.

• Uptrend

Tombstone crosses usually appear at the top of an uptrend. If the pattern is formed in a downtrend or shock city, the bearish signal may not be as significant as it is.

• Doji

Tombstone Cross is a special form of the Doji, so there is no obvious entity that appears.

• Long Shadow

Tombstone cross with a longer upper shadow line, indicating that the stock price in the intraday once strong rise, but the longs failed to hold the results of the day, as of closing, the stock price fell near the opening price.

• Confirmation of morphology

In general, traders will observe whether the next trading day's candlestick is closed below the tombstone cross pattern to confirm a potential bearish signal.

case analysis

Below, we take a headstone cross pattern that appears on the daily chart of United Continental Airlines (UAL) shares.

• Before the tombstone cross pattern, United Continental Airlines stock prices showed an upward trend.

• On the day of the pattern, the stock price opened slightly higher and further higher in the intraday.

• After the share price hit a high point, the short began to force and gradually occupy the dominant advantage. As of closing, the stock price fell very close to the opening price, resulting in a tombstone cross pattern.

• By the next trading day, the share price fell sharply, resulting in further confirmation of the bearish signal.

summed

Overall, Tombstone Cross is a bearish reversal candlestick pattern that usually appears on top of an uptrend.

This pattern helps investors identify potential selling opportunities.

In combat, investors should combine with other technical analysis tools to better aid trading decisions.