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A weak bearish continuation. The bullish rally only reaches the prior low - the "neck" - before selling resumes.
The On Neck Line is a two-candle bearish continuation pattern. After a bearish candle in a downtrend, a bullish candle opens below and closes right at the prior candle's low — on the 'neck' (the bottom) of the first candle.
This is the weakest recovery of the neck-line family. While the In Neck Line closes at the prior *close*, the On Neck Line only reaches the prior *low*. The bullish candle barely recovers any ground at all, confirming that sellers completely dominate.
The On Neck Line shows that buyers can't even recover to the prior close. Candle 1 is a bearish candle in a downtrend. Candle 2 opens below (gap down) and then rallies — but only manages to close at Candle 1's low.
Think about that: the best buyers could do was reach the absolute bottom of the previous candle. They couldn't even get to the close. This is extreme weakness on the buy side.
The On Neck Line is stronger as a bearish continuation signal than the In Neck or Thrusting patterns precisely because the recovery is so minimal. The downtrend should resume with confidence after this pattern.
Conservative: Enter short on a break below Day 2's low.
Aggressive: Enter short at Day 2's close - the rally was too weak.
Above the high of the second (bullish) candle. Similar to In Neck Line - if buyers push significantly higher, the bearish continuation weakens.
T1: The low of the first candle. T2: Previous swing low or support level. The On Neck shows sellers maintain control despite the bounce. Trail stops on subsequent bearish candles.
Minimum 1:2. Bearish continuation patterns work best when aligned with the higher timeframe trend.
The On Neck Line is the most bearish of the neck-line family because it shows the least recovery. Ranked from most bearish to least: On Neck (closes at prior low) > In Neck (closes at prior close) > Thrusting (closes into body below 50%) > Piercing (closes above 50% — this is actually bullish).
The close near the previous low shows sellers still in control. This is a weak pattern - use with other confirmation.
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