Spinning top is a short candlestick with a small real body (either black or white), but with an upper and lower shadow that is longer than the length of its real body. The location of this spinning top is important. It is neutral if found within a consolidation market. But seen after a rally, the spinning top has the potential of signalling a market top, seen after a decline, it could signal a market bottom.
When a Spinning Top becomes a top reversal pattern
After a rally, a black spinning top analyzed in conjunction with the long white candle before it takes the form of a bearish harami, a possible top reversal pattern. Confirmation is require via a black candle closing below the lowest low of the two candles before it. Candle 3 must be close below candle 2 (spinning top) and candle 1 to generate a sell signal. If the color of the spinning top is white in color, this two candle pattern is called a bearish homing pigeon.
The Spinning Top will take the form of a star if it gaps above the previous white candle. Followed by a black closing below the low of the white candle, this spinning top transforms itself into an evening star. An Evening Star is a top reversal pattern. To generate a sell signal, the long black candle must close below the low of the long white candle.
When Spinning Top Become Bottom Reversal Pattern
After a decline, a white spinning top analyses in conjunction with a long black candle (candle 1) takes the form of a bullish pattern harami, a possible bottom reversal pattern. Confirmation is required via a white candle closing above the highest high of the two candle before it. Candle 3 must close above candle 2 (spinning top) and candle 1 to generate a buy signal. If the colour of the spinning top is black, this candle pattern is called a homing pigeon.
When a Spinning Top Becomes a Morning Star
The Spinning Top will take the form a star if it gaps below the previous black candle. If the next white candle closes above the high of the black candle, this spinning top will transform itself into a Morning Star, a bottom reversal candle. To generate a buy signal, the long white candle must close above the high of the long black candle.