Hanging Man Pattern Summary

HANGING MAN PATTERN SUMMARY

After examining our results, the research presented here indicates that the results of the hanging man pattern may be improved by: trading the pattern in bearish markets and requiring the pattern to occur as the highest high of the last five days. Even with these improvements the hanging man pattern was not as effective as other tools. As we’ve learned here, some patterns are good tools to use and some are best left alone.

My research also indicates that results are not improved, or may be diminished, when using the hanging man pattern in the following conditions: requiring volume to be larger than the previous day or larger than average, trading stocks above $20, restricting trades to either high or low volume stocks, requiring the pattern to be the largest range in the last five days, having stock down the day after the pattern, and trading stocks below their 200 day simple moving average.

The improved hanging man pattern requirements are:

• The stock must be in an uptrend.
• The NASDAQ must be in a downtrend or bearish environment.
• The lower shadow must be at least twice the length of the body.
• The body may be either black or white.
• The pattern should occur as the highest high of the last five days.