A Bullish Ladder Bottom signals a possible reversal of a downtrend. The first three days of the pattern are red days with lower opens and closes each day. The fourth day is a red day with an upper shadow. The fifth day is a green up candle that opens above the body of the fourth day.
In a downtrend and after moving down for three consecutive days, the bears feel in control. The fourth day prices trade near the open of the previous day, but close at another new low. Short sellers are up big and are thinking about booking profits. When the fifth day opens higher, shorts scramble out of the market to lock in profits. If volume is high on the fifth day, then a reversal has probably occurred.<< Back to Glossary Index