Hey traders, Barry Burns here with Top Dog Trading. Welcome to Part 2 of my Japanese candlestick series, where I show you how to use one of my all-time favorite candlestick patterns — the rejection-of-value bar — not just with the trend, but against the trend for powerful reversal setups.
In this video, I’m going to walk you through the exact market logic behind this pattern, how to identify it on your charts, and most importantly, how to combine it with trend analysis, support and resistance, momentum shifts, and my Five Energy Methodology to create high-probability trade entries. If you’re serious about mastering candlestick trading, timing reversals, and improving your accuracy, this is the lesson you don’t want to skip.
Hope you enjoy it!
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My Favorite Candlestick Pattern for Reversals – Video
Introduction
Hi traders, Barry Burns here from Top Dog Trading. Welcome to Part Two of our Japanese Candlestick Charting Techniques series. If you missed Part One, you can find it on my channel—watch it later, but stay with this video first.
Review of the Rejection-of-Value Candlestick Pattern for Reversals
In the previous lesson, we focused on one of my favorite candlestick patterns—one that reflects a strong rejection of value. We looked at how it works in the direction of the trend.
Here’s a quick refresher: the ideal bar has a real body that opens and closes near the high, with a long lower wick. That wick shows that sellers pushed the market lower, but buyers stepped in aggressively and forced it back up. Lower prices were rejected, and demand won.
Context Matters: Why You Can’t Trade Candlesticks Alone
This pattern is powerful, but only when used in context. You can’t trade it by itself.
In the example I showed, it appeared during the first pullback of a new uptrend—wave one, wave two—confirmed with my cycle indicator. I prefer buying on retracements rather than breakouts because breakouts often mean you’re paying retail. Retracements let you enter at wholesale prices.
Again, market logic is everything. Whether you use a moving average, an indicator, or a candlestick pattern, you must understand why it works—what buyers and sellers are doing behind the scenes to form that pattern.
Using the Pattern Against the Trend
Now let’s flip it. Instead of using the pattern with the trend, let’s look at using it against the trend.
Here we have the same type of rejection-of-value bar, but this time we’re in a clear downtrend. This is where traders often make a mistake: they see a great candlestick pattern and jump in without considering the bigger picture.
Understanding Trend vs. Short-Term Signals
Candlestick signals are very short-term—they don’t define the trend. A trend is a long-term market structure.
Someone once asked me how long the trend continues after this candlestick pattern appears. Well, it doesn’t create a trend. You use it early in a trend for retracements, or late in a trend for potential reversals. It’s a scalpel, not a broad brush. Moving averages, especially longer ones, are broad-brush tools.
Ignoring Early Counter-Trend Signals and Waiting for a Retest
Back to our chart: the candlestick looks good but shows up early in the downtrend, so we ignore it. Instead, we monitor the area and wait.
Eventually, price comes back to retest that level—and that’s what we want. If I’m going to trade counter-trend, I only do it late in the trend. You’ve heard the saying: the trend is your friend until the end.
What We Need for a Valid Counter-Trend Trade
So here’s what we look for:
- A long-lasting trend
- A rejection-of-value candlestick
- Price testing a support level multiple times
- And ideally, a momentum shift
In our example, we get a rejection of value once, then again on the next touch of support. That support level holds three times. This is what I call the Top Dog Trading Rule of Three: if a level gets tested three times and doesn’t break, it’s less likely to break in the near future.
But again—never trade any one element by itself. Each is just a piece of evidence you combine to create a probability-based case.
Momentum Confirmation: The Final Piece of Evidence
Then we see momentum shifting upward, confirmed by my momentum indicator. At this point, we have multiple uncorrelated signals lining up, and that’s when a counter-trend trade becomes valid.
How This Fits Into the Five Energy Methodology
My overall system is the Top Dog Trading Five Energy Methodology, which combines five types of market “energies”—basically expressions of supply and demand—using indicators, price action, and multi-bar patterns. The goal is to stack evidence, build a strong case, and take high-probability trades.
Get the Free Cycle Indicator Training
If you want to learn more about this approach, including how to set up and use the cycle indicator, I’ve recorded a free training for you. Just visit indicatorwebinar.com and you can watch it anytime.
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