Definition:
An Inverted Umbrella is characterized by having no
lower shadow and but a long upper shadow. The long upper
shadow shows the evidence for selling pressure, but
the position of high price indicates that plenty of
buyers still are around. Inverted Umbrella is a reversal
pattern.
Recognition Criteria:
1. The real body of the Inverted Umbrella is either
a horizontal line or it is significantly small (its
length is not more than a few ticks).
2. There is no lower shadow.
3. However the upper shadow is long.
Explanation:
Inverted Umbrella indicates that buyers dominated the
trading and they were able to drive the prices higher
during the day. However, sellers resurfaced by the end
of the day and pushed prices back to the opening price
level and to the day’s low.
Important Factors:
The Inverted Umbrella has the potential to point out
evidence for buying pressure and indicate a potential
bullish reversal if it appears after a long downtrend,
long black candlestick or if it is seen at a visible
support level. Likewise it may show a failed rally and
indicate a potential bearish reversal if it appears
after a long uptrend, long white candlestick or if it
is seen at a visible resistance level. Bearish or bullish
confirmation is required in both situations.
