candle sticks

This is a three-candlestick pattern signaling a major top reversal. It is composed of a white candlestick followed by a short candlestick which characteristically gaps up to form a star. Then we have a third black candlestick whose closing is well into the first session

This pattern occurs at the bottom of a trend or during a downtrend and it is called a Hammer since it is hammering out of a bottom. It is a single candlestick pattern that has a long lower shadow and a small body at or very near the top of its daily trading range.

Recognition Criteria

1. The market is characterized by a prevailing downtrend.
2. A small body at the upper end of the trading range is observed. The color of the body is not important.
3. The lower shadow of this candlestick is at least twice as long as the body.
4. There is (almost) no upper shadow.

Pattern Requirements and Flexibility

The body of the Hammer should be small. The lower shadow should be at least twice as long as the body but not shorter than an average candlestick. It is desired that there is no or a very tiny upper shadow. The bottom of the Hammer

This pattern consists of a black body followed by an Inverted Hammer that is characterized by a long upper shadow and a small body. It is similar in shape to the Bearish Shooting Star but unlike the Shooting Star the Inverted Hammer appears in a downtrend and signals a bullish reversal.

Recognition Criteria

1. The market is characterized by a prevailing downtrend.
2. The first day of the pattern is a black candlestick.
3. On the second day a small body at the lower end of the trading range is observed. Color of this body is not important.
4. The upper shadow of this second candlestick should be at least twice as long as the body.
5. There is (almost) no lower shadow.

Pattern Requirements and Flexibility

The body of the Inverted Hammer should be small. The upper shadow should be at least twice as long as the body but not shorter than an average candlestick length. It is desired that there is no or a very tiny lower shadow. The bottom of the inverted hammer should be lower than the preceding candlestick

This is a bottom reversal pattern with two candlesticks. A black candlestick appears on the first day while a downtrend is in progress. The second day opens at a new low with a gap down and closes more than halfway into the prior black body leading to the formation of a strong white candlestick.

Recognition Criteria

1. The market is characterized by a prevailing downtrend.
2. A black candlestick appears on the first day.
3. A white candlestick opens on the second day with a gap down and closes more than halfway into the body of the first day.
4. The second day fails to close above the body of the first day.

Pattern Requirements and Flexibility

The first day of the Bullish Piercing Line pattern is a normal or long black candlestick. The second day should open well below the close of the first day and close more than halfway into the prior black candlestick

This pattern occurs when two black days appear with equal closes in a downtrend. Matching Low indicates a bottom has been made even though the new low was tested and there was no follow through which is indicative of a good support price.

Recognition Criteria

1. The market is characterized by a prevailing downtrend.
2. A black body is observed on the first day.
3. The second day follows with another black candlestick whose closing price is exactly equal to the closing price of the first day.

Pattern Requirements and Flexibility

The Bullish Matching Low consists of two black candlesticks. The length of the first candlestick should be normal or long. Both candlesticks should close at the same level.

Trader's Behavior

The market has been lower as evidenced by another strong black day. The next day open higher and trade still higher and then it closes at the same price. This is indicative of short term support and will cause much concern with the bears. What reflects the psychology of the market is not necessarily the daily trading action but with the fact that both days close at the same level.

Buy/Stop Loss Levels

The confirmation level is defined as the midpoint of the first black body. Prices should cross above this level for confirmation.

The stop loss level is defined as the lower of the last two lows. Following the BUY if prices go down instead of going up and close or make two consecutive daily lows below the stop loss level while no bearish pattern is detected then the stop loss is triggered.

This pattern appears in a downtrend and consists of a black candlestick and a white candlestick in which the white candlestick opens above the preceding day