The Mat-hold pattern is a five-candle candlestick pattern. The pattern can be either a bullish or a bearish pattern. Unlike other candlestick patterns, the Mat-hold candlestick patterns do not occur frequently.
The bullish Mat-hold pattern occurs in an uptrend. And the bearish Mat-hold pattern occurs in a bearish trend. Both the patterns are continuation patterns. Both the patterns assure the continuation of the existing trend.
Bullish Mat Hold Candlestick Pattern
What is the Bullish Mat Hold Pattern?
The bullish mat hold is a bullish trend continuation pattern. The pattern consists of five candlesticks of varying sizes and colors. Two big green candles hold three small candles between them. This pattern also contains a price gap in the second candle.
This pattern is a bullish continuation pattern. This pattern signifies the prevailing bullish trend is going to continue. But for a continuation pattern, it also provides space for a bullish trade.
Must Read: Trading with Candlestick Patterns
How Do You Identify The Bullish Mat Hold Pattern?
A bullish mat hold contains at least five candlesticks that form the bullish continuation pattern. The pattern starts with a large bullish candlestick. This is the first candle. The first candle has a high body-to-wick ratio.
The second bar starts with a gap up. Then it comes down and closes below. It has a small body. The second bar is always a small bearish candlestick which starts with a gap up open and then comes down a little bit and closes there.
Due to the small price gap between the opening and closing price, the body of the second candle is small. It is always a bearish candle. Therefore it is a small-bodied red candle.
The second candle is followed by a third and a fourth candle which are similar in structure. The third and the fourth candle also have small bodies and are red in colour. They are also bearish candles. The third and the fourth candles are generally similar in size to that of the second candle.
The fifth candle is a large bullish candlestick. It closes at a higher price than the previous four candles in this mat hold pattern.
We must also note that none of the small candles closes below the opening price of the first candle. This feature is important for the bullish mat hold to become a valid pattern.
Here is a real-time chart is shown above. The bullish pattern occurred somewhere within the bullish trend. The pattern is marked by the blue rectangular box.
We can see there is another small Doji like candle that appeared after the three small candles. This candlestick does not have much significance and does not influence the outcome of the mat hold pattern. It does not have much significance except for showing the indecision of the traders. Hence this Doji or Star pattern do not influence the significance of the pattern. We consider this as an insignificant candlestick and therefore the pattern holds.
These are small variations that may appear in this pattern. While identifying the bullish mat hold pattern, we must consider that. The other features were all there in the pattern. So we considered it a valid pattern.
This bullish candlestick pattern appeared in a bullish trend. After the pattern appeared, the bullish trend continued for a while. The bullish mat hold is a continuation pattern and indicates a continuation of the prevailing bullish trend. In the chart above, we see the bullish trend continued after the appearance of the mat hold pattern.
Interpretation of Bullish Mat Hold Pattern
This mat hold pattern appears in a bullish trend. The behaviour and interpretation of this pattern lead us to divide it into three phases. Let’s discuss the phases one after another.
Phase 1
The pattern appeared in a bullish trend. The first green candle is part of the prevailing bullish trend. Hence buyers impulsively bought the stock intending to take the price higher. The price started increasing with time. Hence the candle closed far above the opening price resulting in a formation of a large bullish candle. This is the first phase in this pattern.
Phase 2
Phase 2 starts with a gap up open. To push the price further up, the bulls start impulsive buying again. These are the traders who traded or missed the trade on the first candle. After an impulsive wave, we have retracement waves.
Thus, the second candle comes down and closes a little lower than the opening price, resulting in the formation of a small-bodied second candle which is bearish. The next two candles are also small bearish candles.
All of the second, third and fourth candles are bearish small bearish candles and form the retracement wave. Though the prevailing trend was bullish, the bears were never strong enough to take control of the market direction. This is proven by the fact that none of the candles in this pattern close below the opening price of the first candle.
This completes phase 2.
Phase 3
In phase 3 we have a large bullish candle. This is the fifth and the last candle of this pattern. This bullish mat hold ends with a large bullish candle that closes at the highest data point than the previous four candles in this pattern.
In all these three phases we find increasing demand for the stock. The demand-supply gap increases with time in this pattern. The buyers control the price action in this pattern. This is the reason we find that bulls are strong enough to continue with the bullish trend.
How to Trade the Bullish Mat Hold Pattern?
Though the mat hold patterns are continuation patterns, traders can make fresh entries when this bullish candlestick pattern combination is found.
In the chart above, we can see when the bullish mat hold was formed. Within a bullish trend (marked by a blue line) the mat hold pattern was formed. After the 5th candlestick, the trader makes entry above the close of the fifth candle. After entering the trade, the bullish trend continues for a while. Trade entry, stop loss and exit follows a plan.
Trade entry
The trade entry is buying a stock in a bullish trend. The trader buys the stock just above the high of the fifth green candle of the bullish mat hold pattern.
Stop loss
The stop loss is placed just below the low of the first bullish candle. The predetermined entry and stop-loss prices are shown in the diagram above.
Exit
The profit target can be the next resistance. The buyer of this bullish pattern can exit at the next price resistance zone.
Trading Bullish Mat Hold Pattern with Fibonacci Levels
We can use the Fibonacci support and resistance levels to calculate all entry, exit and target price levels. Drawing Fibonacci levels from highest to lowest levels of the previous trend gives important support and resistance levels (0% to 100%).
When we find the bullish mat hold pattern, we enter the trade after the price crosses the 50% level, the first resistance zone. The stop loss can be placed either at 23.6% or at 0% (important resistant zones). The first profit target is at 68.1% level and the second profit target is at 78.6% level.
Trading Bullish Mat Hold Pattern with Moving Average
Trading the bullish mat hold using the moving average is also helpful. We can use 20 EMA (20-period EMA) with the candlestick chart. 20 EMA acts as important support.
After trade entry, whenever the price comes below the 20 EMA, the trader should exit. Entry and stop-loss price will be as per the mat hold pattern shown earlier.
Trading Bullish Mat Hold with a Range Filter
In this case, we need tall bullish candles. If the tallest bullish candle is at least three times larger than bearish candles, we enter the trade. The exit will be after the next 5 candles. This is how we use the range filter.
What is the Difference Between Bullish Mat Hold and Rising Three Candlestick Patterns?
In a bullish mat hold pattern, the second candle must open with a gap up price and then come down. But in rising three candlestick patterns, the second candle opens at the closing price of the first candle and then comes down. This is the basic difference between them.
Another difference is, due to the criteria of a gap up open price of the second candle, the bullish mat hold pattern occurs sparsely, which is not the case for rising three methods candlestick pattern.
Bearish Mat Hold Candlestick Pattern
What is the Bearish Mat Hold Pattern?
The bearish mat hold is very similar to the bullish mat hold but just the opposite in appearance and significance. The bearish mat hold is a bearish continuation pattern found in a bearish trend.
It consists of five candles, three small between two large red candles.
How Do You Identify the Bearish Mat Hold Pattern?
The bearish mat hold has 5 candlesticks in the pattern. The first candle is a large bearish candle. The second candle opens with a gap down price but closes higher. The next two candles look similar also. The second, third and fourth candles are small green candles. The fifth candle is a large bearish candle that closes below the low of any of the four preceding candles.
Interpretation of Bearish Mat Hold Pattern
The bearish mat hold is a bearish trend continuation candlestick pattern. The first large candle is part of the existing bearish trend. The second candle, with a gap down price, starts to take price further down, but bulls fight back and takes the price a little higher where the candle closes.
The third and fourth candles are similar to the second candle. All three candles have small bodies and all are bullish candles.
The fifth candle is a large bearish candle that closes at the lowest price of the five candles in this bearish pattern.
The pattern shows that supply is more than demand and therefore bears take control of the situation. It also affirms that the stock price is going to come down further and the bulls made futile attempts to recover which failed ultimately.
How to Trade the Bearish Mat Hold Pattern?
Shown below real-time candlestick chart in which we find a bear mat hold. Short trade was created at a price below the fifth bearish candle. The stop loss is at the high of the highest candle of the pattern. The price target is the next support zone from where the price starts retracing back.
Trade entry
Entre short trade below the low of the fifth bearish candle.
Stop loss
Stop loss is placed above the highest price data point of the pattern. Here it is above the first bearish candle.
Exit
Exit prices at the next support level.
Trading Bearish Mat Hold Pattern with Fibonacci Levels
Similar to bullish mat hold, the Fibonacci levels can be used here also. Short trade initiated just below the 50% support zone. The price target is at 68.1% level or 78.6% level. The stop loss is at 23.6% or 0%.
Trading Bearish Mat Hold Pattern with Moving Average
We can use moving average like 20 EMA with this bearish pattern. The 20 EMA line acts as a resistance line. Stop loss and entry is same as shown earlier for this pattern. The exit is when price breaks through the 20 EMA line.
Trading Bearish Mat Hold Pattern with a Range Filter
Using bearish mat hold with range filter is same as described in bullish pattern. If the fifth candle is three times larger than the body of green candle, then take short entry below the fifth candle and exit after the next fifth candle is complete.
What is the Difference Between Bearish Mat Hold and Falling Three Candlestick Patterns?
The bearish mat hold pattern has the second candle that opens with a gap down but in falling three, the second candle opens at the closing price of the first bearish candle. Also, the bearish mat hold occurs rarely, unlike the falling three.
Inverted Mat Hold Candlestick Pattern
The inverted mat hold is also known as the inverted saucer pattern. It is similar to a bearish mat hold. The fifth bearish candle must open with a gap down and close at the lowest point of the pattern.
Pros and Cons of Mat Hold Candlestick Pattern
The mat hold patterns work fairly accurately when used with other indicators. But they are seldom found in a candlestick chart. Though mat hold patterns are continuation patterns, they provide excellent trading opportunities.
The mat hold patterns work best in daily time frame. Accuracy decreases in shorter time frames.
