If you’ve been following what’s been happening in the S&P 500 over the past week, it looks like it’s sandwiched between a rock and a hard place. In candlestick terms, it’s referred to as a Stick Sandwich. The initial sandwich that began on September 30 has added more toppings in the last couple days compared to the original pattern, but it is still relevant.
What the Stick Sandwich candle patter conveys is a period of relative balance but continued volatility. Unlike other candle patterns, the balance isn’t achieved from open to close but develops over days. The current indecision in the S&P 500 only adds fuel to the reversal or, more importantly, a bearish continuation.
Overall Rating: 3 Star
Directional Bias: Bearish Continuation
Number of Candles: 3
Frequency Rating: 2 Star
Pattern Description:
The Stick Sandwich pattern occurs within a downtrend. The first candle of the formation is a tall, closed candle. The next candle forms an open candle and often gaps higher on the open. The pattern completes with a tall, closed candle that closes near the first candle’s closing price.
Volume Description:
Falling volume during the formation of a Stock Sandwich pattern with higher volume on the breakout increases performance.
Statistical Notes:
Taller Stick Sandwich patterns with long bodies and shorter shadows that occur in a neutral or bearish primary trend increase performance.
Measuring Technique:
Subtract the trading range of the pattern from the close of the last candle.
Conclusion
The Stick Sandwich is a reasonably effective pattern but isn’t that frequent. The fact that it maintains a relatively high level of volatility from day-to-day and indecision makes this pattern more effective as a continuation pattern. The addition of the last two days to the original three-day pattern, may make the result more uncertain. However, the potential for an explosive move is building.
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