Bullish Pin Bars
A bullish pin bar pattern is a candlestick pattern that signals a potential bullish reversal in the market. This pattern is characterized by a single candlestick with a small body that can be either red or green, a long lower shadow, and a short upper shadow. The length of the lower shadow must be at least two-thirds of the entire length of the candlestick.
The long lower shadow of a bullish pin bar indicates that the price dropped significantly during the trading period of the candlestick, but was then rejected at this lower level and was pushed back up. This rejection of lower prices suggests that the market sentiment has shifted and that buyers are likely to enter the market.
Traders often look for additional confirmation of the bullish pin bar pattern before taking a long position, such as a break above a key resistance level or a bullish crossover of technical indicators.
For a bullish pin bar pattern to be valid, the following conditions must be met:
For reversal signals, the preceding trend should be a downtrend with higher lows and lower lows.
For trend continuation signals, the preceding trend can be either an uptrend or downtrend.
The previous and subsequent candlestick after a bullish pin bar formed, should not touch the low price of the pin bar candlestick. While this condition is not commonly used, I highly recommend taking it into consideration to avoid false signals.
Below is a great example of a green bullish pin bar that formed at the end of a downtrend on the 1H TSLA stock and indicated a sharp trend reversal. As you can notice, the previous and subsequent candlesticksâ low prices are well above the pin barâs low price.
And here is an example of a false signal of a bullish pin bar pattern on 19 October 2020. The preceding trend is an uptrend so a bullish pin bar in this case should signal a trend continuation on the upside. However, the following candlestickâs price went below the pin barâs low and therefore invalidated the signal.
