Long Yin followed by a small Yang with shrinking volume: Is it a downward relay?

The "Long Yin followed by a small Yang with shrinking volume" pattern often signals a downward relay in crypto markets, confirmed by low volume and bearish indicators.

Jun 06, 2025 at 03:29 pm

In the dynamic world of cryptocurrency trading, chart patterns and volume analysis play a crucial role in helping traders make informed decisions. One such pattern that often sparks debate among traders is the "Long Yin followed by a small Yang with shrinking volume." This pattern is often scrutinized to determine whether it signals a "downward relay" or a continuation of a bearish trend. Let's delve into the details of this pattern and explore whether it indeed indicates a downward relay in the cryptocurrency market.

Understanding the Long Yin and Small Yang Pattern

The "Long Yin followed by a small Yang with shrinking volume" pattern refers to a specific sequence on a candlestick chart. Here's a breakdown of the components involved:

• Long Yin: This represents a long bearish candle, indicating a significant downward movement in price over a specific period.
• Small Yang: Following the long bearish candle, a small bullish candle appears, suggesting a minor upward movement in price.
• Shrinking Volume: The volume during the small Yang candle is notably lower compared to the volume during the Long Yin candle.

This pattern is often observed after a period of downtrend and is crucial for traders looking to predict future price movements.

Analyzing the Pattern in the Context of a Downward Relay

A "downward relay" refers to a continuation of a bearish trend after a brief pause or minor recovery. To determine whether the "Long Yin followed by a small Yang with shrinking volume" pattern indeed signals a downward relay, we need to consider several factors:

• Price Action: The long bearish candle (Long Yin) indicates strong selling pressure. The subsequent small bullish candle (Small Yang) suggests a weak attempt at a recovery, which is often a sign of bearish continuation.
• Volume Analysis: The shrinking volume during the small Yang candle is a critical indicator. Low volume during a bullish candle after a strong bearish move suggests a lack of buying interest, reinforcing the likelihood of a bearish continuation.
• Market Sentiment: The overall market sentiment and other technical indicators can provide additional context. If other indicators also suggest a bearish trend, the pattern's reliability as a downward relay increases.

Case Studies of the Pattern in Cryptocurrency Markets

To better understand the implications of the "Long Yin followed by a small Yang with shrinking volume" pattern, let's examine a few real-world examples from the cryptocurrency markets.

• Bitcoin (BTC): In early 2022, Bitcoin experienced a significant downtrend, with a long bearish candle followed by a small bullish candle with reduced volume. This pattern preceded a further decline in price, confirming the pattern's role as a downward relay.
• Ethereum (ETH): A similar pattern was observed in Ethereum's price chart in mid-2021. After a long bearish candle, a small bullish candle with low volume appeared, and the price continued to decline, indicating a bearish continuation.

These case studies highlight how the pattern can be a reliable indicator of a downward relay in the cryptocurrency market.

Technical Indicators to Confirm the Pattern

While the "Long Yin followed by a small Yang with shrinking volume" pattern can be a strong indicator of a downward relay, it's essential to use other technical indicators to confirm the signal. Here are some key indicators to consider:

• Moving Averages: If the price is below the moving averages, especially the 50-day and 200-day moving averages, it supports the bearish outlook suggested by the pattern.
• Relative Strength Index (RSI): An RSI below 50, particularly if it's trending downwards, can confirm the bearish momentum indicated by the pattern.
• MACD (Moving Average Convergence Divergence): A bearish crossover in the MACD, where the MACD line crosses below the signal line, can reinforce the downward relay signal.

Trading Strategies Based on the Pattern

Traders can leverage the "Long Yin followed by a small Yang with shrinking volume" pattern to develop effective trading strategies. Here are some strategies to consider:

• Short Selling: After confirming the pattern with other technical indicators, traders can initiate short positions, anticipating further price decline.
• Stop-Loss Orders: Setting stop-loss orders just above the high of the small Yang candle can help manage risk and protect against unexpected price movements.
• Position Sizing: Adjusting position sizes based on the strength of the pattern and other confirming indicators can help manage risk and maximize potential returns.

Implementing the Pattern in Trading Software

To effectively use the "Long Yin followed by a small Yang with shrinking volume" pattern in trading, it's essential to know how to implement it in trading software. Here's a step-by-step guide on how to set up this pattern in a popular trading platform like TradingView:

• Open TradingView: Log into your TradingView account and select the cryptocurrency chart you want to analyze.
• Add Indicators: Click on the "Indicators" button at the top of the chart and search for "Volume" to add the volume indicator to your chart.
• Identify the Pattern: Manually scan the chart for a long bearish candle (Long Yin) followed by a small bullish candle (Small Yang). Ensure the volume during the small Yang candle is lower than during the Long Yin candle.
• Confirm with Other Indicators: Add other technical indicators like moving averages, RSI, and MACD to confirm the bearish signal suggested by the pattern.
• Set Alerts: If you want to be notified when this pattern occurs, set up an alert by clicking on the "Alerts" button and configuring it to trigger when the pattern is detected.

By following these steps, traders can effectively use the pattern to inform their trading decisions.

Frequently Asked Questions

Q: Can the "Long Yin followed by a small Yang with shrinking volume" pattern appear in other financial markets?

A: Yes, this pattern can be observed in other financial markets such as stocks, forex, and commodities. However, the interpretation and reliability may vary depending on the market's specific dynamics and liquidity.

Q: How reliable is the "Long Yin followed by a small Yang with shrinking volume" pattern as a predictor of a downward relay?

A: The reliability of the pattern can vary, but it is generally considered a strong indicator of a bearish continuation when confirmed by other technical indicators and market sentiment. Historical data and case studies suggest a high probability of a downward relay following this pattern.

Q: What should traders do if they observe a "Long Yin followed by a small Yang with shrinking volume" pattern but other indicators suggest a bullish trend?

A: In such cases, traders should prioritize the overall market context and other technical indicators. If the majority of indicators suggest a bullish trend, it may be prudent to wait for further confirmation before acting on the pattern alone. Divergent signals can indicate a potential false breakout or reversal.

Q: How can traders improve their ability to recognize the "Long Yin followed by a small Yang with shrinking volume" pattern?

A: Regular practice and analysis of historical charts can help traders become more proficient at recognizing this pattern. Additionally, using trading software with customizable alerts and pattern recognition tools can enhance a trader's ability to identify the pattern in real-time.