What is Matching Low?

The process to identify the current trend and when it is going to reverse is a part of an extended process called Technical Analysis. This analysis is the study of chart patterns, graphs, and diagrams on a screen. The idea is to understand price and volume trends and pick stock accordingly.

Technical analysis is based on the premise that historical market trends tend to repeat over time. One of the most widely used ways for investors to evaluate stocks and the market trend is by reading candlestick charts. In this blog, you will learn what candlestick charts are, and a factor called Matching Low that occurs on these candlestick charts.

Through Matching Low candlestick patterns, you can analyze market patterns and make informed investing decisions.

What are Candlestick Charts?

If you have ever looked at a chart or graph of stock, you may have seen what looks like colored candles positioned in various places. These are called candlesticks, and the chart you are looking at is called the candlestick chart.

Candlesticks visually represent the size of the price fluctuations of a specific stock. Investors use these candlesticks to understand where the market is going (market trend) based on the price fluctuations and predict the trend reversal (when the current trend will be reversed). Each candle has three parts:

• The Body
• The Upper Shadow
• The Lower Shadow

The body is either of green or red color and has four points of data:

• Open The first trade during the represented period.
• High: The highest traded price.
• Low: The lowest traded price.
• Close: The last trade during the represented period.

Let’s move on to a factor that occurs on it, called the Matching Low candlestick pattern.

What is the Matching Low candlestick pattern?

A Matching Low candlestick pattern is a bearish reversal pattern that occurs on a candlestick chart. The Matching Low candlestick pattern is always represented by two candles and helps predict when the current trend is going to reverse and head in the same or opposite direction. The main assumption behind the Matching Low candlestick pattern is that the current selling is going to end, indicating that the stock has hit its bottom price or the support level. The Matching Low candlestick pattern and the two candles within are two long down candles which are either of black or red color with matching closing prices.

Understanding the Matching Low candlestick pattern The stock market works on the principle of investor sentiment. For example, if investors think that a company is not doing well or will not do well because of some current negative factors, they start selling their investments to either book profits or cut their losses.

Once a sell-off starts, the price begins to decline, forcing other investors to sell in panic. This creates a chain reaction where the stocks’ price starts falling steeply. However, every company has some revenue and good business factors that are represented by a support level (a level where the fall in price is expected to stop).

This support level is the point where two things can happen; either the stock will go up in price supported by buying interest or fall more by continued selling and minimal buying. This point is reflected on a candlestick pattern through the Matching Low candlestick pattern. The pattern occurs after a steep price decline of a specific stock. It indicates that the stock’s price has hit its potential bottom or that the stock price has reached its support levels.

How to trade the Matching Low candlestick pattern?

Under the Matching Low candlestick pattern, the first long black candle occurs on the first day, followed by the second candle on the next day with an opening higher than the previous day’s closing price. The second candle also has a closing price that is identical to or very close to the opening price of the first day.

Once you have identified the Matching Low candlestick pattern, you will know that the stock’s price has hit the support level. The first long black candle that occurs indicates that the ongoing fall in price is likely to continue in the future. At this point, it means that the bull investors have successfully opened the price higher than the previous day’s closing price.

The second small candle indicates that the bear investors have lost control of the market, which is the stock’s support level. From here, either the price may go up because of the bull investors or may go further down. It is better to do a detailed technical analysis at this point and use immediate stop loss for every trade.

What is Matching Low Trader Psychology?

The Matching Low Trader Psychology is the concept of bears and bulls fighting over the control of the market. Under the Matching Low candlestick pattern, if the first long black candle closes lower than the opening price, it means that the bears are taking control of the market. If this happens, it would mean that the price may go down further.

However, if the gap between the closing and the opening price is higher on the second candle, it means that the bulls are taking control of the market. It indicates that the stock price may go up from this point, and the bearish trend may reverse.

Final Words

The Matching Low candlestick pattern is a factor that provides an investor with valuable insight into the downfall of a stock. As a price decline is usually taken as a negative factor by beginner investors, professional investors know that it is the right time to buy after it reaches its support level.

The Matching Low candlestick pattern best represents this information. However, as the price may fall further down, it is vital that once you identify the Matching Low candlestick pattern, you perform a detailed technical and fundamental analysis to mitigate the overall risk.