What it looks like
Price is falling. Candle one is a long down candle. Candle two is a small up candle that opens below candle one and closes at, or almost exactly at, candle one's low. It does not get back into the first candle's body. The pattern's low is the bottom of the second candle and its high is the top of the first.
What it means
Sellers drove a strong candle. Buyers then had a turn and could only lift price back to the first candle's low. The fall paused and sellers came straight back. It says the trend is still in charge and the pause was only a rest. In a sideways market it means nothing.
How to trade it
- 1
Confirm the market is falling, with lower highs and lower lows. Skip it if price is moving sideways.
- 2
Wait for price to close below the pattern's low, then sell.
- 3
Example: on the gold 15 minute chart in a downtrend, an on-neck spans 11 points; the sell comes on a close below its low.
- 4
Place the stop just above the pattern's high, about 11 to 12 points in that example.
- 5
Target the next swing low or 2 times the stop.
A close above the pattern's high.
Where it works best
In a clean downtrend on 15 minute and higher charts, especially just after price has broken below a floor and is pausing under it.
WickSpeak finds the on-neck automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, in plain English. In Playbook you can use the on-neck, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your own costs.
Common mistakes
- Buying the small up candle as if it were a bottom.
- Using it in a range with no fall behind it.
- Selling before the close below the pattern's low.
Related patterns
Questions traders ask
Is the on-neck pattern bullish or bearish?
It is bearish. It appears in a fall and says the trend is likely to carry on after a weak bounce.
What is the difference between on-neck and in-neck?
In an on-neck the up candle closes at the first candle's low. In an in-neck it closes just inside the first candle's body. Both are traded the same way, with the trend.
What proves the on-neck wrong?
A close above the pattern's high. That means buyers have taken back the whole pattern, so the continuation has failed.
Is the on-neck a reversal pattern?
No. It is a continuation pattern. The small up candle looks like a bounce, but it is too weak to change anything.