Mat Hold Pattern: Understanding Its Dynamics, Examples, and Trading Strategies

A mat hold pattern, a distinctive candlestick formation, provides insights into the continuation of an existing trend. In an uptrend, the bullish variant begins with a robust upward candle, followed by a gap higher. Subsequent to this, three smaller downward candles follow, all maintaining levels above the low of the initial candle. The sequence concludes with a final substantial upward candle. Conversely, the bearish mat hold pattern, observed within a downtrend, mirrors its bullish counterpart with large downward candles. The pattern concludes with a significant downward candle, maintaining levels below the high of the first candle.

The bullish mat hold pattern within an uptrend signals a potential resumption of the upward trend. Traders may opt to initiate buy positions near the close of the fifth candle or enter a long trade on the following candle. A prudent strategy involves placing a stop loss below the low of the fifth candle. Conversely, the bearish mat hold pattern within a downtrend indicates a probable continuation of the downtrend. Traders may consider selling or shorting near the close of the fifth or subsequent candle, with a stop loss placed above the high of the fifth candle.

Illustrating the mat hold pattern’s rarity, the example from Alphabet Inc. (GOOG) displays a slight deviation, featuring four candles instead of the typical three in a bullish pattern. Despite this anomaly, the pattern demonstrates a robust initial rise, a subsequent pullback, and a renewed surge in the trending direction. Traders may allow for minor variations in the pattern while acknowledging its scarcity.

A closely related pattern is the rising three pattern, differing in the absence of a gap following the first candle. Like the mat hold, the rising three pattern is also infrequent.

The mat hold pattern’s scarcity poses a challenge for traders. Its infrequent occurrence, coupled with unpredictable price movements following the pattern, necessitates caution. Additionally, the absence of a predefined profit target within the pattern requires traders to employ alternative methods, such as trend analysis or technical indicators, for effective exit strategies. Considering the mat hold pattern as part of a broader analytical framework is prudent, as relying solely on its signals may prove unreliable.

No, the mat hold pattern is considered rare in financial markets. Its infrequent occurrence requires traders to exercise vigilance and consider alternative technical analysis tools.

Yes, traders may allow for slight deviations in the number of candles within the mat hold pattern, recognizing its rarity. However, deviations should not compromise the overall structure and premise of the pattern.

No, the mat hold pattern does not offer a predefined profit target. Traders need to complement its signals with trend analysis or technical indicators to determine suitable exit points.

No, due to its infrequency and limited predictive capabilities, it is recommended to use the mat hold pattern in conjunction with other forms of analysis for a more comprehensive and reliable trading strategy.

Yes, the mat hold pattern can be applied to various financial instruments, but its effectiveness may vary. Traders should conduct thorough analysis and consider market conditions before incorporating it into their trading decisions.