Can I confirm the reversal when the long lower shadow line hits the bottom and the next day the positive line with large volume is used?

A long lower shadow candlestick may signal a potential reversal, especially when confirmed by a strong positive candle and high volume.

Jun 29, 2025 at 11:07 am

Understanding the Long Lower Shadow Candlestick Pattern

In technical analysis, a long lower shadow candlestick is often interpreted as a sign of potential reversal in price direction. This type of candlestick forms when prices fall significantly during the trading period but then recover to close near or above the opening price. The long lower wick indicates that sellers initially dominated the session, pushing prices down, but buyers stepped in and reversed the momentum before the candle closed.

The presence of a long lower shadow line hitting the bottom suggests that the market may have reached a temporary support level. However, this pattern alone should not be used to confirm a reversal. Traders must look for additional signals to validate whether the downtrend is indeed ending.

Important: A single candlestick pattern should never be relied upon exclusively for making trading decisions.

---

Identifying Reversal Confirmation with the Next Day's Positive Line

After observing a long lower shadow at the bottom of a downtrend, traders often wait for confirmation from the following day’s candlestick. If the next candlestick is a positive line, especially one that closes well above the previous candle’s closing price, it can indicate that buying pressure has taken over.

A key factor in confirming a reversal is the relationship between the current candle and the prior one. Specifically, traders look for:

• The second candle to close above the midpoint of the first candle.
• The second candle to show strong bullish characteristics such as a large body and minimal upper or lower shadows.

When these conditions are met, the probability of a genuine reversal increases, especially if other technical indicators align with the price action.

---

The Role of Volume in Confirming Reversals

Volume plays a crucial role in validating any candlestick-based reversal signal. When a positive line appears with large volume, it suggests that institutional or smart money is entering the market, supporting the idea of a trend change.

To assess the significance of volume:

• Compare the volume of the positive candle with the average volume of the preceding 10–20 candles.
• Look for a sharp increase in volume on the positive candle compared to the bearish candle before it.
• Ensure that the volume is not just a short-lived spike but reflects sustained interest.

High volume accompanying a bullish candle helps eliminate false signals and confirms that the reversal has real momentum behind it.

---

Combining Candlestick Patterns with Technical Indicators

To enhance the reliability of the reversal signal formed by a long lower shadow followed by a positive candle with high volume, traders often combine candlestick patterns with technical indicators. Some commonly used tools include:

• Moving Averages: A bullish crossover or a price move above key moving averages (e.g., 50-day or 200-day) can strengthen the reversal signal.
• Relative Strength Index (RSI): An RSI rising from oversold territory (below 30) into neutral or bullish levels supports the idea of a trend reversal.
• MACD: A MACD line crossing above the signal line and generating a histogram expansion adds further confirmation.

Using multiple indicators in conjunction with candlestick patterns helps filter out noise and increases confidence in trade entries.

---

Practical Steps to Confirm the Reversal Signal

To practically apply this reversal strategy, follow these steps:

• Identify a clear downtrend where a candle forms with a long lower shadow and closes near its high.
• Observe the next candle for a positive close that shows strength and ideally gaps up.
• Check if the volume on the second candle is significantly higher than recent sessions.
• Use additional technical tools like moving averages or oscillators to corroborate the reversal.
• Wait for a pullback or retest of the prior candle’s high to enter with better risk-reward ratios.

Each step serves to build a layered approach to entry, reducing the chances of acting on a false signal.

---

Frequently Asked Questions

Q: Can I use this reversal pattern on all timeframes?

Yes, the long lower shadow followed by a positive candle can appear on any timeframe. However, signals on higher timeframes (like daily or weekly charts) tend to be more reliable than those on intraday charts.

Q: What if the positive candle has a long upper shadow?

A long upper shadow might suggest hesitation among buyers. While it doesn’t invalidate the reversal, it could indicate resistance ahead. It’s safer to wait for another confirmation candle.

Q: How much volume increase is considered significant?

There's no fixed threshold, but a general rule is that the volume should be at least double the average of the past 10 candles. Context matters—volume surges in low liquidity assets may differ from highly liquid ones.

Q: Should I place a stop-loss order when trading this pattern?

Absolutely. Risk management is essential. Place your stop-loss below the low of the long lower shadow candle to protect against false breakouts or failed reversals.