Ladder Bottom

Ladder Bottom is not a common but an interesting trend reversal pattern.

Imagine four consecutive bearish candles appearing in the downtrend. There is a series of lower high, lower low and lower closing prices, indicating that the trend and price action is very bearish.

In the next session after the bearish candles, price opens higher and above the closing price of previous bearish candlestick pattern and closes above the body of the previous candlestick. It turns out to be a significant bullish body candle. This pattern is known as a Ladder Bottom formation.

This pattern indicates that a significant bottom is in place. The pattern gets negated if price falls below the bottom price of the fifth candle of the pattern.

Even though this is a bullish reversal pattern, the price action is not very bullish. There is a strong downtrend followed by a bullish candle stick pattern which could possibly be a short-term pullback or a short-term correction. Look for more confirmation and evidence that there is a demand in the ladder bottom area and that the bottom is indeed strong.

The pattern needs more evidence. Higher the size of the fifth candlestick pattern and higher the volume in that pattern, stronger the pattern.

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This pattern can be plotted on the chart by adding it from the Add study menu in TradePoint & Patterns in RZone. The pattern is also available in the System Builder section. By combining this pattern with other patterns and indicators, you can create your own trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.