Mat Hold Pattern

A mat hold pattern represents a situation in technical analysis that involves a stock (or whatever asset your watching), briefly faking that it will change direction...but then turning back in the direction it was going in the first place.

You're headed out for the day, walking toward your car. At the top of your driveway, just out of your front door, you briefly think you forgot your keys. You stop, turn, take a couple steps back toward the house...just then, you find the keys in your jacket pocket. You shake your head and turn back toward the car. That's basically the mat hold pattern. It works in both directions, whether a stock is headed higher or lower.

The bullish version (with the stock headed higher) goes like this:

The stock is on an upswing...generally trending higher of late. On the first day of the mat hold pattern, there's a big gain. On the second day, the stock gaps open higher again, looking like it will continue advancing, but it falls following the open, and ultimately finishes the day lower (although the losses are relatively small). It then declines the next two days (again, relatively small losses).

Even after the total losses over the previous three days, the stock is still above where it started the first day of the pattern. Finally, on Day Five, the stock goes higher again, rising to its highest level of the pattern.

The bearish version would reverse this pattern: a big decline, followed by some small gains, with a turn back to the downside on Day Five.

The mat hold pattern signals that the stock will continue on its original trajectory. The bullish version means more gains in the future. The bearish version means more losses.