BEARISH CONTINUATION CANDLESTICK PATTERNS

BEARISH CONTINUATION PATTERNS

BEARISH REVERSAL CANDLESTICK PATTERNS



BEARISH REVERSAL PATTERNS



BULLISH CONTINUATION CANDLESTICK PATTERNS

BULLISH CONTINUATION PATTERNS

CANDLESTICKS PATTERN - BULLISH THREE INSIDE UP

BULLISH THREE INSIDE UP

Type: Reversal

Relevance: Bullish

Prior Trend: Bearish

Reliability: High

Confirmation: Suggested

No. of Sticks: 3

Definition:

The Bullish Three Inside Up Pattern is another name for the Confirmed Bullish Harami Pattern. The third day is confirmation of the bullish trend reversal.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a Bullish Harami Pattern in the first two days.
3. Then we see a white candlestick on the third day with a higher close than the second day.

Explanation:

The first two days of this pattern is simply the Bullish Harami Pattern, and the third day confirms the reversal suggested by the Bullish Harami Pattern, since it is a white candlestick closing with a new high for the last three days.

Important Factors:

The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.

CANDLESTICKS PATTERN - BULLISH PIERCING LINE

BULLISH PIERCING LINE

Type:	Reversal
Relevance:	Bullish
Prior Trend:	Bearish
Reliability:	High
Confirmation:	Suggested
No. of Sticks:	2

Definition:

Bullish Piercing Line Pattern is a bottom reversal pattern. A long black candlestick is followed by a gap lower during the next day while the market is in downtrend. The day ends up as a strong white candlestick, which closes more than halfway into the prior black candlestick’s real body.

Recognition Criteria:

1. Market is characterized by downtrend.
2. We see a long black candlestick.
3. Then we see a long white candlestick whose opening price is below previous day’s low on the second day.
4. The second day’s close is contained within the first day body and it is also above the midpoint of the first day’s body.
5. The second day however fails to close above the body of the first day.

Explanation:

The market moves down in a downtrend. The first black real body reinforces this view. The next day the market opens lower via a gap. Everything now goes, as bears want it. However suddenly the market surges toward the close, leading the prices to close sharply above the previous day close. Now the bears are losing their confidence and reevaluating their short positions. The potential buyers start thinking that new lows may not hold and perhaps it is time to take long positions.

Important Factors:

In the Bullish Piercing Pattern, the greater the degree of penetration into the black real body, the more likely it will be a bottom reversal. An ideal piercing pattern will have a real white body that pushes more than half way into the prior session’s black real body.

A confirmation of the trend reversal by a white candlestick, a large gap up or by a higher close on the next trading day is suggested.

BULLISH REVERSAL CANDLESTICK PATTERNS

BULLISH REVERSAL PATTERNS

CANDLESTICKS - Hammer & Hanging Man

Hammer

This candle looks like a hammer, as it has a long lower wick and a short body at the top of the candlestick with little or no upper wick. In order for a candle to be valid hammer most traders say the lower wick must be two times greater than the size of the body portion of the candle, and the body of the candle must be at the upper end of the trading range.

The Hammer is a bullish reversal pattern that forms after a decline.

In addition to a potential trend reversal, hammers can mark bottoms or support levels.After a decline, hammers signal a bullish revival.

When you see the hammer form in a downtrend this is a sign of a potential reversal in the market as the long lower wick represents a period of trading where the sellers were initially in control but the buyers were able to reverse that control and drive prices back up to close near the high for the day, thus the short body at the top of the candle.

While this may seem enough to act on, hammers require further bullish confirmation.The low of the hammer shows that plenty of sellers remain.

After seeing this chart pattern form in the market most traders will wait for the next period to open higher than the close of the previous period to confirm that the buyers are actually in control.Further buying pressure, and preferably on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick.

Two additional things that traders will look for to place more significance on the pattern are a long lower wick and an increase in volume for the time period that formed the hammer.Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal.

Hanging Man

A hanging man is a type of candlestick pattern, made up of just one candle. It has a long lower wick and a short body at the top of the candlestick with little or no upper wick. In order for a candle to be a valid hanging man most traders say the lower wick must be two times greater than the size of the body portion of the candle, and the body of the candle must be at the upper end of the trading range.

The Hanging Man is a bearish reversal pattern that can also mark a top or resistance level. Forming after an advance, a Hanging Man signals that selling pressure is starting to increase. The low of the long lower shadow confirms that sellers pushed prices lower during the session. Even though the bulls regained their footing and drove prices higher by the finish, the appearance of selling pressure raises the yellow flag. As with the Hammer, a Hanging Man requires bearish confirmation before action. Such confirmation can come as a gap down or long black candlestick on heavy volume.