Technical Analysis
Candlestick Patterns
What's a Candlestick
A Candlestick represent OHLC (Open, High, Low, Close) of a stock in a particular timeframe. Candlestick patterns can predict if a stock goes up or down.
Types of Candlesticks
Based on Trend
- Bullish: These type of candles appear at the end of a downtrend indicating that the stock goes up afterwards. Ex: Hammer Candle
- Bearish: These type of candles appear at the end of an uptrend indicating that the stock goes down afterwards. Ex: Shooting star
- Indecision: Some candles indicate the indecision in the market. It might go up or down. Ex: Doji
Based on Number
- Single Candlestick Patterns: Can determine the candle and pattern with one candlestick. Ex: Hammer
- Double Candlestick Patterns: Can determine the candle and pattern with two candlesticks. Ex: Piercing Pattern
- Multi Candlestick Patterns: Can determine the candle and pattern with three or more candlesticks. Ex: The Morning Star
Single Candlestick Patterns
Hammer (Bullish)
A Hammer is a bullish reversal pattern that appears after a downtrend. It has a small real body at the top with a long lower shadow, suggesting that bears pushed the price down but failed, and bulls took control, leading to a potential price reversal. If a Red hammer appears at the uptrend, its called Hanging man and its bearish.
Inverted Hammer (Bullish)
The Inverted Hammer is another bullish reversal pattern that appears after a downtrend. It has a small real body at the bottom with a long upper shadow, indicating that bears tried to push the price lower but failed, and bulls stepped in, potentially reversing the downtrend. If a inverted red hammer appears at the top of an uptrend, then it's called a shooting star and it's bearish.
Long-legged Doji (Indecision)
A Long-legged Doji is a neutral pattern characterized by a small real body and long upper and lower shadows. It suggests indecision in the market, as neither bulls nor bears have gained significant control.
Spinning Top (Indecision)
The Spinning Top is another neutral pattern with a small real body and long upper and lower shadows. It indicates market indecision, with both buying and selling pressure, but no clear direction.
Marubozu (Bullish)
A Marubozu is a strong bullish or bearish candlestick with no shadow or wick. A Bullish Marubozu has no upper shadow and suggests strong buying pressure from the opening to closing price.
Double Candlestick Patterns
Piercing Pattern (Bullish)
The Piercing Pattern is a bullish reversal pattern that appears after a downtrend. It consists of two candles, with the second one opening lower than the first but closing well above the midpoint of the first candle, indicating a potential bullish reversal.
Bullish Engulfing (Bullish)
A Bullish Engulfing pattern is a bullish reversal pattern that appears after a downtrend. The second candle completely engulfs the first, suggesting a shift from bearish sentiment to bullish sentiment.
Bearish Engulfing (Bearish)
The Bearish Engulfing pattern is a bearish reversal pattern that appears after an uptrend. The second candle completely engulfs the first, indicating a shift from bullish sentiment to bearish sentiment.
riple Candlestick Patterns
Morning Star (Bullish)
The Morning Star is a bullish reversal pattern that appears after a downtrend. It consists of three candles, with the middle one being a small-bodied Doji or Spinning Top, indicating indecision, followed by a bullish candle, suggesting a potential reversal to an uptrend.
Three White Soldiers (Bullish)
Three White Soldiers is a bullish reversal pattern that appears after a downtrend. It consists of three consecutive long and bullish candles, indicating a strong shift from bearish to bullish sentiment.
Evening Star (Bearish)
The Evening Star is a bearish reversal pattern that appears after an uptrend. It consists of three candles, with the middle one being a small-bodied Doji or Spinning Top, indicating indecision, followed by a bearish candle, suggesting a potential reversal to a downtrend.
Three Black Crows (Bearish)
Three Black Crows is a bearish reversal pattern that appears after an uptrend. It consists of three consecutive long and bearish candles, suggesting a strong shift from bullish to bearish sentiment.