The Spinning Tops pattern is a formation of japanese candlesticks which indicates indecision in the market although it has a medium to low level of reliability. This pattern can be observed in both bull and bear markets and can be identified as follows:
- A small black or white body with lines of short extension.
Spining Tops Pattern Interpretation
While these candles by themselves will give the trader some information, the spinning top should be used in conjunction with other candles and/or indicators because they do not have a high level of reliability.
Basically they are an indication that the market may be losing its strength and that the predominant trend is losing momentum so we must be alert to a possible change in the trend but by itself is not a signal to open a countertrend position. The interpretración that the Japanese give to the Spinning Top is that “the market is running out of breath.” In this case there is a tie between buyers and sellers, which means that the buying power and sales force are balanced.
The Spinning Top may have some significance when it occurs in the maximum or minimum of trends, whether they are bullish or bearish trends as these candles can indicate an exhaustion of the movement. For example, if during a strong uptrend appears one of these candles behind an important white candle, it means that buyers have trouble getting the price continue to rise. On the other hand, if appears a spinnig top behind an important black candle in a strong downtrend, this is a sign that sellers are experiencing problems to keep lowering the price at the same rate.
Although we can not use this pattern to make decisions about opening and closing positions, we can obtain information about accumulations and distributions on the market in a given period. If we observe this pattern in a market moving and we use various technical analysis indicators, we can obtain information about the possibility of producing a Distribution condition in a bull market or a Accumulation condition in a bear.