Candle Sticks
This candlestick implies a relatively weak selling pressure with a limited price movement. Recognition Criteria
1. The body of the candlestick is black and small.
Candlestick Requirements and Flexibility
The black body of the candlestick should be small. The lengths of the shadows are not important.
Trader
This candlestick implies a relatively weak buying pressure with a limited price movement. Recognition Criteria
1. The body of the candlestick is white and small.
Candlestick Requirements and Flexibility
The white body of the candlestick should be small. The lengths of the shadows are not important.
Trader
This candlestick implies normal buying pressure and shows that prices advanced during the day from open to close and the buyers were in control.
Recognition Criteria
1. The body of the candlestick is white with normal length.
Candlestick Requirements and Flexibility
The white body of the candlestick should be of average length. The shadows? length is not important.
Trader?s Behavior
This candlestick alone is not reliable enough to decide about bullishness since it reflects only one day?s trading that was under buyers? control. It may show the continuation of a trend as well as the reversal. Other neighboring candlesticks must be taken into consideration for a decision regarding market direction.
In many ways chart patterns are simply more complex versions of trend lines. It is important that you read and understand our articles on Support and Resistance as well as Trend Lines before you continue.
Chart pattern analysis can be used to make short-term or long-term forecasts. The data can be intraday daily weekly or monthly and the patterns can be as short as one day or as long as many years. Gaps and outside reversals may form in one trading session while broadening tops and dormant bottoms may require many months to form.
This candlestick represents extreme bearishness and it is characterized with a long black body that has an upper shadow but no lower shadow.
Recognition Criteria
1. The body of the candlestick is black and long.
2. There is no lower shadow.
Candlestick Requirements and Flexibility
The black body of the candlestick should be longer relative to the other candlesticks on the chart. It has a shadow on the opening side but no shadow on the closing side.
Trader
This candlestick represents extreme bullishness and it is characterized with a long white body that has a lower shadow but no upper shadow.
Recognition Criteria
1. The body of the candlestick is white and long.
2. There is no upper shadow.
Candlestick Requirements and Flexibility
The white body of the candlestick should be longer relative to the other candlesticks on the chart. It has a shadow on the opening side but no shadow on the closing side.
Trader
This pattern appears in an uptrend and warns that the trend will change. It consists of a white candlestick and a Doji with a gap up at the opening. If the Doji is in the form of an Umbrella the pattern is called
This pattern appears in a downtrend and warns that the trend will change. It consists of a black candlestick and a Doji with a downward gap at the opening. When the Doji is in the form of an Umbrella the pattern is called
This pattern is characterized by a large black body engulfing a preceding smaller white body which appears during an uptrend. The black body does not necessarily engulf the shadows of the white body but totally engulfs the body itself. This is an important top reversal signal.
Recognition Criteria
1. The market is characterized by a prevailing uptrend.
2. A white body is formed observed on the first day.
3. The black body that is formed on the second day completely engulfs the white body of the preceding day.
Pattern Requirements and Flexibility
The length of the first white candlestick is not important. It can even be a Doji. The second one however has to be a normal or long black candlestick. Either the body tops or the body bottoms of the two candlesticks may be at the same level but in any case the black body of the Bearish Engulfing Pattern should be longer than the previous white body.
Trader?s Behavior
While the market is characterized by a definite uptrend lower volume of buying is observed with the occurrence of a white body on the first day. The next day the market opens at new highs. It looks as if there?s going to be more bullish trading however the uptrend loses momentum and the bears take the lead during the day. The selling pressure overcomes buying and finally the market closes below the open of the previous day. The uptrend is damaged.
Sell/Stop Loss Levels
The confirmation level is defined as the last close. Prices should cross below this level for confirmation. The stop loss level is defined as the last high. Following the bearish signal if prices go up instead of going down and close or make two consecutive daily highs above the stop loss level while no bullish pattern is detected then the stop loss is triggered.
This pattern is characterized by a large white body engulfing a preceding smaller black body which appears during a downtrend. The white body does not necessarily engulf the shadows of the black body but totally engulfs the body itself. This is an important bottom reversal signal.
Recognition Criteria
1. The market is characterized by a prevailing downtrend.
2. A black body is observed on the first day.
3. The white body that is formed on the second day completely engulfs the black body of the preceding day.
Pattern Requirements and Flexibility
The length of the first black candlestick in Bullish Engulfing is not important. It can even be a Doji. However the second one has to be a normal or long white candlestick. Either the body tops or the body bottoms of the two candlesticks may be at the same level but in any case the white body should be longer than the previous black body.
Trader
