What it means
Candlestick charts show the open, high, low and close of each trading period using a small body and thin lines called wicks. A stick sandwich takes three candles to form.
In the bullish version, the first is a bearish candle that closes lower, the second is a bullish candle that trades above the first one's close, and the third is another bearish candle that closes at the same price as the first. The matching closes are what give the pattern its meaning.
Sellers pushed the price to the same level twice but could not push it lower the second time, which suggests buyers are defending that level. Traders treat it as a possible support area, so they watch for the price to rise from there.
A bearish version also exists, mirroring the pattern after a rise, with two bullish candles closing at the same high level around a bearish middle candle. It suggests that buyers cannot push the price beyond that level, which may act as resistance.
The pattern is most meaningful when it appears after a clear trend and on heavier trading volume. Traders usually wait for confirmation before acting, for example a following candle that closes above the third candle's high.
They place a stop-loss order, an instruction to sell automatically if the price falls to a set level, just below the matching close. This keeps the potential loss limited if the pattern fails.
The nuance is that candlestick patterns are not predictions with fixed odds. Closes rarely match exactly, so traders often accept a small tolerance, and results differ between markets and time frames.
Used alone, the pattern is weak, but combined with trend, volume and other indicators it can help with timing.
In practice
Real-world examples.
Example
A swing trader notices a stick sandwich on the daily chart of a retail stock that has fallen for two weeks. Both bearish candles close at $48, with a bullish candle between them. She buys on the next day's rise and sets her stop just under $48.
Example
A currency trader sees a bearish stick sandwich on a euro chart after a strong rise. He waits for a candle that closes below the pattern's lows before selling, and risks only a small portion of his account. The extra patience helps him avoid a false signal.
Example
A finance student building a trading simulation counts how many bullish stick sandwiches in historical data led to a rise over the next five days. She finds the result is little better than chance when used alone. She concludes that the pattern needs support from other signals.
Formula
Calculation
Risk per share = entry price - stop-loss price
Reward per share = target price - entry price
Suppose a stock in a downtrend forms a bullish stick sandwich with both bearish candles closing at $48. A trader buys at $52 after confirmation and places a stop-loss at $48, so risk per share is 52 - 48 = $4. She sets a target of $60, so reward is 60 - 52 = $8 per share, a reward-to-risk ratio of 8 / 4 = 2 to 1. If she is willing to lose $2,000 on the trade, she can buy 2,000 / 4 = 500 shares.Case study
Seen in the real world.
Marlin Capital is an illustrative, fictional proprietary trading firm that tested candlestick patterns on ten years of data for a basket of mid-sized shares. Analysts coded the bullish stick sandwich using a rule that the two closing prices had to be within 0.2% of each other.
The pattern appeared 140 times, and the price rose over the following five days in 82 cases, a success rate of 82 / 140 = 58.6%. However, after trading costs, the average gain per trade was only $12 per 100 shares, which was too small to justify a strategy.
The team found the results improved when the pattern occurred on high volume near a long-term support level. The illustrative lesson is that a pattern can hold slight predictive value, but it needs context and cost control to be useful.
Watch out
Common mistakes.
- Trading the pattern without a downtrend or uptrend before it, when it only has meaning as a possible reversal signal.
- Expecting the two closing prices to match to the last decimal place, when a small tolerance is normal.
- Ignoring stop-losses and trade costs, when a modest success rate can easily turn into a loss.
Questions
People also ask.
What makes a stick sandwich bullish?
Two bearish candles close at the same price with a bullish candle between them, appearing after a decline.
How reliable is it?
It is not reliable on its own, and many traders use it together with volume, trend lines and other indicators.
Is it useful for long-term investors?
Rarely, because candlestick patterns focus on short-term timing, while long-term investors usually focus on business value.
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