A Thrusting Pattern is taken as a signal of continued downward market movement. It’s a confirmation signal derived from a particular pattern on a candlestick chart.
The graphic shows a bearish market. The trend to the downside is being continued by Candlestick 1 and then Candlestick 2 shows a time interval where bulls come back into the market.
The key point of the pattern is that Candlestick 2 has a close which is lower than the mid-point of the real body of Candlestick 1. (The strict definition includes the condition that the close of Candlestick 2 is higher than the close of Candlestick 1. If it closes lower than the real body of Candlestick 1 it can be considered the variant: ‘Strong Continuation Thrusting Pattern’).
The pattern is showing that bulls stepped into the markets but were ultimately rebuffed. The shadow to the bottom of Candlestick 2 indicates that during the period the down trend was continuing. The signal does of course display a partial trend reversal; the second candlestick is after all green. What those looking to trade to the downside take from the pattern is that the reversal failed.
The Thrusting Pattern is not the most reliable of signals. Stepping back for a moment it’s clear to see that there is at least some indication of bulls stepping in. It does certainly highlight an interesting situation but really needs to be considered in conjunction with other indicators.
Should candlestick 2 for example be associated with significantly higher trading volumes then this would support the analysis. The extra trading volumes would show that the bullish pressure was significant, they stepped in, in size, but ultimately the bears won. The market consensus has been established through the interaction of a great deal of market participants and indicates that there is more downwards price action to follow.