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Written and copyright © 2008-2009 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts  , pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
Above the stomach is a simple candlestick pattern and yet it works very well, functioning as a bullish reversal 66% of the time. You can also spot it often because it has a frequency
rank of 32 out of 103 candle patterns, where 1 is most often.
Details about the pattern are sketchy, though. According to one website I checked, the candle is a two line pattern that appears in a downward price trend. The first candle is black and
the second is white with a body at or above the midpoint of the prior candle’s body.
Important Results
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Theoretical performance: Bullish reversal
Tested performance: Bullish reversal 66% of the time
Frequency rank: 32
Overall performance rank: 31
Best percentage meeting price target: 61% (bull market, up breakout)
Best average move in 10 days: -4.86% (bear market, down breakout)
Best 10-day performance rank: 33 (bear market, down breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
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 Above The Stomach
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Discussion
The above the stomach candle is an easy one to find. Look for two candles in a downward price trend. The first one is black and the second is white. The body of the second should be
at or above the middle of the first candle’s body. In other words, the opening and closing prices of the second day must be above the mid point of the first candle’s body.
The candle represents a bullish reversal both in theory and reality, according to my testing. The above the stomach pattern reverses the downtrend 66% of the time, which is a good
score. The overall performance rank is 31, which is far from 1, but is nevertheless a decent showing.
The above the stomach candle exhibits its best performance 10 days after the breakout by dropping an average of 4.86% in a bear market, ranking 33rd out of 103 candlestick patterns, where
1 is best.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Two. |
| Price trend leading to the pattern | Downward. |
| Configuration | Look for two candles in a downward price trend. The first candle is black and the second white. The white candle should open and close at or above the mid
point of the black candle’s body. |
Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- Above the stomach candles that appear within a third of the yearly low perform best -- page 92.
- Above the stomach candles within a third of the yearly high frequently act as reversals -- page 95.
- Above the stomach works best as part of a downward retracement in an upward price trend -- page 93.
Example
The above the stomach candlestick pattern appears on the daily scale and it is circled in red. The candle appears in a downward price trend
with the first candle being black followed by a white one. The white candle has a body that is above the mid point of the body of the black candle, and this one acts as a
temporary reversal of the downward price trend.
I say temporary reversal because when price rejoins the downward price trend, it cannot fight the current for long. The upward move falters and then price begins sliding,
pulled down by a downward price trend already established. For this reason, that is why I recommend trading this candle as part of a downward retrace in an upward price trend.
When price exits from the candle pattern, it rejoins the upward trend and off you go.
-- Thomas Bulkowski
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