The bottoming tail candlestick pattern is one of the easiest to spot. It looks like a hammer and when you see it, you should pay attention to this pattern. The odds are good that the stock is going to have a bullish reversal.
Since it looks like a hammer, some people do call it a hammer candlestick pattern.
This is what a bottoming tail looks like. It has a small body and a long tail. If it is green, that means it opened lower but close higher.
The close is the same as the high of the day. The low is represented by the tail
What happened to the trading day is the stock dropped a lot only to recover back up and ended the day higher.
You may see some difference in color between the above and your stock chart. It all depends on how you setup your chart. Some may not have a green body but a black body or the body is not filled.
Sometimes you may see a bottoming tail with a small upper wick. That just means the high of the day is slightly higher than the close of the day.
Don't worry, just remember that a bottoming tail candlestick looks like a hammer.
Easy to spot right?
Let's take a look at the chart of MSFT above. If you don't know by now, each stock is assigned a ticker symbol. Tech stocks usually have 4 letters.
The chart above is the daily chart of Microsoft stock and the ticker symbol is MSFT.
There are 2 bottoming tails in the chart which I want to bring to your attention. The first one is in November and the other one is in early 2023.
Notice how MSFT went back up both times when the bottoming tail appear. It almost seems that the appearance of the bottoming tail made the stock moved back up.
The second bottoming tail appeared near the prior low.
When a bottoming tail appears at a prior low, it is likely to bounce back up
A prior low is actually a support area and that is why it works so well.
So far so good?
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Let's take a look at another chart example. This time Apple's daily stock chart, ticker symbol is AAPL.
This stock is in an uptrend and in July it had a small correction to a support area. Notice how a bottoming tail formed at the support area?
When this happens, it is perfect for swing traders to take a position in the stock. The stock went back up for a few trading days. Enough to give the swing trader a nice trade in the stock.
A bottoming tail that appears at a support area is more powerful
I hope this short article has help you to understand the power of the bottoming tail in spotting bullish reversals. You may even devise a trading strategy based on this.
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