The Tower Top and Tower Bottom candlestick patterns are trend reversal patterns that essentially consists of two large candlesticks with two or three small candlesticks between them. The two large candlesticks are of different colors while the smaller candlesticks between them represent a lull in the market, or a period of indecision. As these are trend reversal patterns, the Tower Top and Tower Bottom candlestick patterns are only significant if they occur in well-defined trends, with Tower Top pattern being a bearish reversal pattern and needing to appear in an established uptrend wile the Tower Bottom pattern is a bullish reversal pattern that should appear in a downtrend.
Tower Top Candlestick Pattern
The Tower Top pattern is a bearish reversal pattern that is significant if it appears in a well established uptrend. The first candlestick in the pattern is a relatively large bullish candlestick that is light in color. This candlestick is supportive of the underlying uptrend and illustrates the strength and conviction of the bulls. However, it is followed by two or three candlesticks with relatively short real bodies that does not move the market higher in any significant way. These candlesticks are followed by another relative large candlestick that is bearish and dark in color, forming the second tower of the pattern. The overall pattern creates a top with a tower on either side of the pattern. It can also form a rounding top.
The smaller candlesticks between the two towers indicates that the bullish market sentiment has started to wane. The second tower confirms that the market sentiment has shifted and a bearish trend reversal can be anticipated.
Tower Bottom Candlestick Pattern
The Tower Bottom pattern is the bullish version of the Tower Top pattern. It should appear in a well defines downtrend for it to considered a significant reversal signal. The first candlestick in the Tower Bottom pattern is a relatively large bearish candlestick that is dark in color and is supportive of the underlying downtrend. This candlestick indicates that the bears are still in control of the market. However, this strength begins to wane as the large bearish candlestick is followed by a few small candlesticks with relatively short real bodies that fails to drive the market lower. These small candlesticks are followed by the second tower that is another relative large candlestick. The second tower is bullish and light in color, creating a bottom with a tower on either side of the pattern. The second tower confirms that the market sentiment has become bullish and a bullish trend reversal should be anticipated.