The Mat Hold candlestick pattern is a rare continuation pattern that is similar to the three methods pattern. As it is a trend continuation pattern, it must occur in an already established trend, and indicates that the current trend could be expected to continue. The Mat Hold pattern can be a bullish or a bearish continuation pattern, depending on the direction of the trend that it occurs in.
The Bullish Mat Hold Pattern
The bullish mat hold pattern occurs in an established uptrend and confirms the continuation of that trend. It starts with a large light colored candlestick that confirms the current uptrend, followed by three smaller dark-colored candlesticks that move against the trend in a consolidation phase, and finally another large light colored candlestick that again confirms the uptrend. The second candlestick in the pattern has a gap or window on open but turns back to close lower the trend. It and the other two bearish candlesticks should not move below the low of the first candlestick in the pattern.
The second, third and fourth candlestick in a bullish mat hold represents a minor pull back in an existing uptrend that has become a little over saturated. The consolidation phase occurs as some traders take profit. After consolidation, the market moves with fresh impetus in the direction of the trend. The close of the last candlestick represents an opportunity to enter a long position with a protective stop at the low of the fifth candlestick.
The Bearish Mat Hold Pattern
The bearish mat hold pattern occurs in a downtrend and begins with a large, dark-colored candlestick that confirms the current downtrend. This is followed by three smaller bullish candlesticks that are light in color. The last candlestick in the pattern is another large candlestick that is dark in color and confirms the downtrend. As is the case with the bullish mat hold pattern, the second candlestick in the pattern must gap down to form a falling window on open, only to close higher or against the trend. It, and the other two bullish candlesticks should not move above the high of the first candlestick in the pattern.
As with the bullish mat hold pattern, the second, third and fourth candlestick in a bearish mat hold represents a minor correction in an existing downtrend that has become a little over saturated. The correction occurs as some traders close their short positions to take profit. After the correction, the market moves down in the direction of the trend, confirming the strength of the downtrend. The close of the last candlestick represents an opportunity to enter a short position with a protective stop at the high of the last candlestick in the pattern.