The On Neck pattern consists of two candlesticks: a tall bearish candle followed by a significantly shorter bullish candle. The second candle opens lower than the first but closes at or near the closing price of the previous candle.

This pattern is referred to as "On Neck" because when the closing prices of both candles are the same (or nearly identical), they create a horizontal line resembling a "neckline" or "neck." Essentially, the closing prices of both candles are "on the neck."

The On Neck pattern is recognized as a continuation pattern.

To identify the On Neck pattern, look for the following criteria:

• A downtrend must be in effect.
• A tall black (bearish) candle should appear.
• A smaller white (bullish) candle must follow the black candle.
• The close of the white candle should closely align with the low of the previous candle, without exceeding the low of the black candle.

To confirm the On Neck pattern, observe for a black candle on the third day that continues the downward trend. A long body indicates strength, especially if there is a gap between the second and third days.

Meaning

The On Neck pattern signifies that bears are in control of the market, maintaining their dominance. The first candle is bearish, reinforcing the downtrend, while the subsequent bullish candle opens and closes below the first candle.

This movement indicates a likely continuation of the downtrend, suggesting that traders should continue to follow the trend while preserving the structure as much as possible.