Paper umbrella is a single directional candlestick pattern. It tells you the reversal in direction of the trade. As you can see in the image above, you can identify this candle by simply looking at the wick or shadow which is long or say 1/3 rd of the real body. it’s a trend reversal pattern, which informs you about the change in the trend that is suppose to happen.
You have to look the prior trend while using this pattern. However, the color of the candles does not matter, what matter is where it appears. If it appear after a downward rally, there can be trend reversal and bulls can take charge of the situation. Whereas, in case of uptrend rally, the bears can make the trend in reverse direction. Basically, there are two types of paper umbrella:
- Hanging man