Spinning Tops and Bottoms Pattern

Spinning Tops and Bottoms is a Japanese candlestick pattern with a short real body positioned vertically between long upper and lower shadows. The pattern reflects indecision about the asset’s future direction, meaning neither buyers nor sellers were able to control the market.

Related reading: Learn about the most common Japanese candlestick patterns

The Spinning Tops and Bottoms pattern forms when buyers push the price up during a given period and sellers push the price down during the same period, forming a top in an uptrend or a bottom in a downtrend, but the close ends up very close to the open.

After a strong price rise or decline, a spinning top can signal a possible bearish reversal if the next candle confirms it, or a spinning bottom can signal a possible bullish reversal. The close of a spinning top or spinning bottom can be above or below the open, but the two prices always stay close to each other.

[AFF-CTA: pending]

Key Takeaways for the Spinning Tops and Bottoms Pattern:

• Spinning Tops and Bottoms is a Japanese candlestick pattern with a short real body positioned vertically between long upper and lower shadows.
• The real body should be small, showing little difference between the open and close prices.
• Because both buyers and sellers pushed the price but neither could hold it, the pattern shows indecision and can be followed by more sideways price action.

What Does the Spinning Tops and Bottoms Pattern Tell You?

Spinning tops and bottoms are a sign of indecision in the asset, and the long upper and lower shadows show no real net change in price between the open and close. Bulls pushed the price sharply higher and bears pushed it sharply lower, but by the end of that timeframe the candle closed near where it opened.

This indecision can point to more sideways price action, especially if the spinning tops and bottoms occur within a defined range, and it can also point to a possible price reversal if it happens after a price rise or decline.

Sometimes a spinning top or bottom can signal a significant change in direction. A spinning top forming at the top of an uptrend can be a sign that the bulls are losing control and the trend may reverse. Likewise, a spinning bottom at the bottom of a downtrend can signal that the bears are losing control and the bulls may take over.

As with other Japanese candlestick patterns, the confirmation candle that follows the pattern helps clarify where prices are likely headed next. If a trader believes the Spinning Tops and Bottoms pattern after an uptrend could lead to a bearish reversal, the opposite applies after a downtrend.

The candle following the Spinning Tops and Bottoms pattern should show a price decline in an uptrend and a price rise in a downtrend. If that doesn’t happen, the reversal isn’t confirmed and the trader needs to wait for another trading signal before making a decision. If the candle following the pattern stays within the range of the spinning tops and bottoms, this suggests the indecision is still in play and the sideways range is likely to continue, meaning the price stays inside the defined channel.

The Spinning Tops and Bottoms pattern is a common candlestick pattern, which means it works best combined with other forms of technical analysis such as indicators, support and resistance. For example, traders may look at technical indicators like the Moving Average Convergence Divergence (MACD) or the Relative Strength Index (RSI) for reversal signs before entering a trade based on the Spinning Tops and Bottoms pattern. Below is an example of the spinning tops and bottoms pattern:

The chart example above shows a spinning bottom and a spinning top. The first, a spinning bottom, occurs after a price decline and is followed by an up candle, pointing to further price gains once the confirmation candle appears, as shown.

The second, a spinning top, occurred within a range that confirms the current market indecision and was followed by a large down candle, which ended up being a reversal candle as the price began to decline. The example highlights the importance of confirmation, since the Spinning Tops and Bottoms pattern inside trends usually helps confirm the range and the market’s indecision.

The Difference Between Spinning Tops and Bottoms and Doji:

Spinning tops/bottoms and doji both represent indecision in price through small real bodies with upper and lower shadows. The difference is that spinning tops and bottoms have long upper and lower shadows, while a doji’s upper shadow is longer than the lower one, which can be nearly absent. Both patterns occur fairly often and are sometimes used to warn of a reversal after a strong price move, and both candlestick types rely heavily on confirmation.

The strong move that follows a spinning top/bottom or a doji tells you more about the likely new price direction than the spinning tops and bottoms or doji pattern itself.

Limitations of Using the Spinning Tops and Bottoms Pattern:

The Spinning Tops and Bottoms pattern is one of many patterns that are often observed when prices go through periods of indecision, which makes sense, since spinning tops and bottoms tend to occur when price is moving sideways or is about to start reversing.

When it comes to forecasting reversals, how common spinning tops and bottoms are makes a reversal possible, but confirmation is required in the candle that follows the pattern. Even with confirmation, there is no guarantee that the price will keep moving in the new direction for long, so targets need to be studied carefully.

Trading using the Spinning Tops and Bottoms pattern can also create some issues, since the candle can be quite large from top to bottom. If confirmation appears after the pattern and a trade is taken, placing a stop-loss far above or below the shadows of the pattern can create risk large enough that it isn’t justified by the potential profit.

The Spinning Tops and Bottoms pattern forms when buyers push the price up during a given period and sellers push the price down during the same period, but the close ends up very close to the open. After a strong price rise or decline, the Spinning Tops and Bottoms pattern can signal a possible price reversal if the next candle confirms it.

Related reading:

• Best types of Japanese candlesticks
• Candlestick patterns | the 14 most common trend-reversal patterns
• Explaining the best 9 patterns for trading Japanese candlesticks

Frequently Asked Questions:

How do I identify tops and bottoms?

To identify tops and bottoms on a chart, follow these steps:

1- Choose the time period you want to analyze on the chart. 2- Look for the higher prices within the chosen period, identified by the higher peaks on the chart. 3- Look for the lower prices within the chosen period, identified by the lower troughs on the chart. 4- Draw trend lines to represent the uptrend or downtrend, connecting the higher price peaks when the trend is up, or connecting the lower price troughs when the trend is down.

These lines can be used to identify support and resistance levels and to anticipate the future direction of price.

How do you identify a stock’s bottom?

To identify a bottom in a stock on a chart, follow these steps:

1- Choose the time period you want to analyze on the chart. 2- Look for the lower prices within the chosen period, identified by the lower troughs on the chart. 3- Draw trend lines to represent the downtrend, connecting the lower price troughs when the trend is down.

These lines can be used to identify support and resistance levels and to anticipate the future direction of price.

Various technical indicators such as momentum, RSI, and MACD can also be used to identify the bottom and top and to gauge the stock’s likely direction over the coming days.

Identifying the bottom level means finding the stock’s lowest support point, the level that resists further losses and signals a possible buying opportunity.

What is a reversal candle?

A reversal candlestick is a type of Japanese candlestick that signals a reversal in market direction. These candles occur when the prevailing market direction changes suddenly, from an uptrend to a downtrend or the reverse, and they usually appear at the end of the current trend.

Reversal candles are marked by a long body and long shadows, with the candle’s body color differing from the prior trend. There are several recognized reversal candlestick types, including the head-and-shoulders candle, the Hammer, the profit-taking candle, and the Doji (sideways-trading candle), among others.

Reversal candles are used in technical analysis as a tool for identifying entry and exit points in the market, entering the market when a reversal candle signals a change in market direction.

What are tops and bottoms?

Tops and bottoms are terms used in the technical analysis of stocks and financial markets, referring to the highest and lowest points, respectively, in the uptrend and downtrend that price follows.

Tops are identified when price reaches its highest point in an uptrend, followed by a pullback in price. Tops are used as a resistance level; if broken to the upside, this can signal a new uptrend.

Bottoms are identified when price reaches its lowest point in a downtrend, followed by a rise in price. Bottoms are used as a support level; if broken to the downside, this can signal a new downtrend.

These terms, along with support and resistance levels, are used to identify tops and bottoms in technical market analysis, in order to anticipate future price movement and make appropriate trading decisions.

Related articles

• Heikin-Ashi Candles
• Japanese Candlestick Patterns
• Sushi Roll Pattern
• Heikin Ashi Trading Strategy
• Engulfing Pattern Strategy