Candlestick

The Japanese Candlestick theory forms the foundation of most Technical Analysis used to read and analyze the market movements and determine where the market is heading. Here we will list some of the most common candlestick patterns and what it represents.

3 Soldiers

3 Soldiers

Three white soldiers, the soldiers are the frontline people during war times. They are the people fight for their country. When you see three green candlestick after a prolong downtrend, then it is time for you to go for a war. When three consecutive green candlestick is seen follow the soldiers. If you see especially with high volumes then you can be pretty sure that the reversal has already happened.

3 Black Crows

3 Black Crows

Three black crows, is directly opposite of Three soldiers. When you see three red candlestick after a prolong uptrend, then it is time for you to sell short. The Japanese are the people they strongly believe that bad news has got wings. They use the word crows as they see a bad omen. When three consecutive Crows candlestick is seen follow the crows. If you see especially with high volumes then you can be pretty sure that the reversal has already happened.

Stick Sandwich

Stick Sandwich

Stick sandwich, which is a bottom reversal pattern, occurs after a prolong downtrend. The condition is you will see a long red candlestick which dictates the current trend and the next candlestick you see a green candlestick which is a first warning signal that the trend is about to change. The next candlestick again you see a long red candlestick which closes almost the same as the first candlestick. This pattern looks like an Engulfing pattern but the candlestick is different colour. The main condition is the two candlestick must have the same colour and same closing price and the in between candlestick must have a different colour.

The Japanese Candlestick theory forms the foundation of most Technical Analysis used to read and analyze the market movements and determine where the market is heading. Here we will list some of the most common candlestick patterns and what it represents.

Engulfing Engulfing (Bullish) Bullish Engulfing, as the name explains the green candlestick engulfs the red candlestick. It happens at the bottom of the market trend. There are two conditions for this to take place. The market must be in a clear downtrend and the two candles must engulf; the second real body (green) must engulf the first. The engulfing pattern also acts as a support and resistance. Engulfing (Bearish) Bearish engulfing is the opposite of the bullish engulfing. Also, the market must be in a clear uptrend. The engulfing pattern also acts as support and resistance.

Dark Cloud Cover Dark Cloud Cover This pattern is called Dark-cloud cover. The condition for this pattern to occur is the market must be in a strong uptrend and the market must open above the high of the previous bar and the closing price must be towards the low. The pattern is reliable, depending how low it closes. The highest high of the two candles acts as a resistance. Can you look at the charts and identify the patterns?

Piercing Line Piercing Line The piercing pattern is the opposite of the Dark – cloud cover and it happens in the bottom of the market. As the name explains, the price pierces the previous bar. The condition for this pattern to occur is the market must be in a strong downtrend and the market must open below the low of the previous bar and closing price must be towards the high. This pattern is reliable on depending on how high it closes. Remember the lowest low also acts as support. Can you look at the charts and identify the patterns?

Harami Harami (Bullish) Harami (Bearish) Harami pattern is a small real body that is contained within the long black or white real body. Harami in Japanese means pregnant. Harami can be bullish or bearish, depending on its position. If it happens after a prolong uptrend then it is Bearish Harami. In western, they call it as inside day. The range of the current candlestick is within the previous candlestick. Fundamentally, it means the market is undecided and doesn’t know which way to move. You need to have confirmation when you see this signal.

The Japanese Candlestick theory forms the foundation of most Technical Analysis used to read and analyze the market movements and determine where the market is heading. Here we will list some of the most common candlestick patterns and what it represents.

Doji Doji This is one pattern that we would consider very reliable; looking at it carefully can give you a lot of conclusion. It is called Doji in Japanese, Just by looking at it fundamentally; you can conclude the bulls and bears have neither won the battle. They can’t decide which way to move, i.e. the opening and closing price is almost the same. This pattern is very reliable especially if it happens after a pro long uptrend or down trend. One condition to apply in trading with this trend is, the market must give you a confirmation that it has already turned. Don’t just enter blindly, immediately after you see a Doji. Gravestone Doji This is called a gravestone Doji in Japanese. It has got its name, the bulls who bought after they see gravestone Doji in an uptrend and going to get killed. Especially you see a next day to be a lower close. Can try to identify the Doji’s and convince yourself that it really works. Dragon Fly Doji This is called dragon fly Doji. It is the opposite of the gravestone Doji. It usually occurs on the bottom. The name is given because, after you see this pattern and you turn bullish you can fly like dragon fly.

Belt Hold Belt Hold (Bullish) Belt Hold (Bearish) Bullish belt hold line is a strong white or green candle that opens on the low of the session and closes on the high with a very small higher shadow. Bearish belt –hold line is a strong black or red candle that opens on the high of the session and closes on the low with a very small lower shadow. The longer the height of the belt holds with the heavy volume the more significant it becomes.

Counter Attack Counter Attack (Bullish) Bullish Counter Attack lines are formed when opposite coloured candles have the same closing price. The bullish counter attack lines gap opens on the low and closes on the previous closing price. Counter Attack (Bearish) Bearish counter attack lines are formed when opposite candles have the same closing price. The bearish counter attack lines gap opens on the high and closes on the previous closing price.

Tweezers Tweezer Top Tweezer Top Tweezers top and bottom are with two candles with matching highs or lows. When we say matching means it must be same price or one or two ticks variance.

The Japanese Candlestick theory forms the foundation of most Technical Analysis used to read and analyze the market movements and determine where the market is heading. Here we will list some of the most common candlestick patterns and what it represents.

Windows / Gap Windows / Gap Windows are another term used for gaps. Whenever there is a sudden shock in the market, the windows happen. When the market opened above the previous close, then a rising window has occurred. Windows are difficult to trade on short term but can be very reliable on long term. Whenever you see a window, you have to wait and see whether that window is a genuine or false. If the window is a genuine the high or low of the previous candle acts as support and resistance and any retracement you can take entry. Windows have to be closed at any point of time and the markets don’t like windows. When the market opened below the previous closing price then a falling window has occurred.

Abandon Baby Abandon Baby Top Abandon Baby Bottom It is a very rare top or bottom reversal signal. The condition is it must have a Doji star which gaps away from the prior session. The gap must be very obvious; the shadows of the prior candlestick and the later candlestick must not be touched. The westerners call this pattern as Island reversals. The Island reversal can be one or more candlestick. Mr. Steve Nison said in his book that it has to be the Doji, but we believe that any other reversal pattern has significance. Abandoned baby can be bullish or bearish after a prolong downtrend or uptrend.

Morning Star Morning Star Morning star means if enter long after you see this pattern you see a bright future. The Morning star comprises of a tall red candlestick which denotes the current trend and after that you see a small real body which opens in a gap and closes above the open. This candlestick can be either red or green but must be a narrow range candlestick. The next day should be a up close or green candlestick for us to confirm a morning star pattern.

Evening Star Evening Star Evening star meaning, enter short after you see this pattern. The Evening star comprises of a tall green candlestick which denotes the current trend and after that you see a small real body which opens in a gap and closes below the open. This candlestick can be either red or green but must be a narrow range candlestick. The next day should be a down close or red candlestick, for us to confirm an Evening star pattern.