Module 4: 21 EASY CANDLESTICK PATTERN

21 EASY CANDLESTICK PATTERN

(How to read a candlestick and What a candlestick meant)

Takeaways:

• A bull market is a market that is on the rise and where the economy is sound; while a bear market exists in an economy that is receding, where most stocks are declining in value.
• Although some investors can be “bearish,” the majority of investors are typically “bullish.” The stock market, as a whole, has tended to post positive returns over long time horizons.
• Black = Red Candle
• White = Green Candle

 

1. Doji Candle Stick Pattern

• It represents equilibrium between supply and demand, a tug of war that neither the bulls nor bears are winning.
• The doji can be both a reversal pattern and a continuation pattern.

Example

2. Long-legged Doji

• It says that prices moved far higher on the day, but then profit taking kicked in. Typically, a very large upper shadow is left.

Example

3. Gravestone Doji

• Also known as Reverse Dragonfly.
• On that day, price rallied, but could not stand the altitude they achieved.

By the end of the day, they came back and closed at the same level.

Example

4. Dragonfly Doji

• It depicts a day on which prices opened high, sold off, and then returned to the opening price.
• Powerful reversal indicator and does point to large moves ahead.

Example

1. Tristar Doji

• It occurs during a downtrend; confirmation is required by the candles that follow the Pattern.
• The Second Doji is below the other Two Doji Candles.

Example

6. Abandoned Baby Pattern

• The gaps leave a clear distance between the shadow of the doji candle and both shadows of the first and third candle, leaving it abandoned.

Example

7. Evening Star Pattern

• This occurs during a sustained uptrend.
• On the first day we see a candle with a long white body. Everything looks normal and the bulls appear to have full control of the stock. On the second day, however, a star candle occurs. On the third day, a candle with a black real body emerges.

Example

8. Morning Star Pattern

• The stock must have been in a definite downtrend.
• The first day of the signal must be a long dark body. The second day must be a day of indecision. The third day should be a long white candle reaching at least halfway into the body of the first day’s dark candle.

Example

9. Spinning Top High Wave

• Spinning Top Wave / High Wave candle
• Candlestick that has an open and close price near each other which produces a small real body and color is of no importance. They also have long upper and lower shadows that significantly exceed the length of the body.

Example

10. Hammer

• Appears after a prolonged downtrend.
• On the day of the hammer candle, there is strong selling, often beginning at the opening bell. As the day goes on, however, the market recovers and closes near the unchanged mark, or in some cased even higher.

Example

11. Inverted Hammer

• Can only occur after a sustained downtrend; the stock is in all probability already oversold. Therefore, the inverted hammer signifies that traders who have held long positions in the security, most of whom are now showing large losses, often are quick to dump their shares by selling into strength.

Example

12. Hanging Man

• Always occurs after an extended uptrend.
• The hangman occurs because traders, seeing a sell-off in the shares, rush in to grab the stock a bargain price.

Example

13. Shooting Star

• This can appear only at a potential market top.
• The day the shooting star occurs, the market ideally should gap higher.

Example

14. Bullish Harami

• Candle can occur in either bullish or bearish trends, but the colors are reversed.
• A bullish Harami occurs when there is a large bearish red candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. Again, the most important aspect of the bullish Harami is that prices gapped up on Day 2 and price was held up and unable to move lower back to the bearish close of Day 1.

Example

15. Three Black Crows

• Does not happen very frequently in stock trading, but when it does occur swing traders should be very alert to the crow’s caw.
• On the day the first black crow makes its appearance, the formation is most predictive if the first dark candlestick closes below the previous candle’s real body. Two more long-bodied consecutive down days then ensue.

Example

16. Dark Cloud Cover

• The stock closes at least halfway into the previous white capping candle. The larger the penetration of the previous candle, the more powerful the signal.

Example

17. Engulfing Pattern

• There is both a bearish and bullish engulfing pattern.
• The bearish engulfing candle happens at the end of an uptrend, and the bullish at the end of the downtrend.

Example

18. Piercing Pattern

• The day before the piercing candle appears, the daily candle should ideally have a fairly large dark real body, signifying a strong down day.
• In the classic piercing pattern, the next day’s candle gaps below the lower shadow, or previous day’s low.

Example

19. Candlestick Sandwich

• The candlestick sandwich is also a bullish reversal pattern over three days action.
• The pattern forms with two red candles surrounding one green candle in the middle, creating a sandwich.

Example

20. Three White Soldiers

• This pattern is most potent when it occurs after an extended decline and a period of subsequent consolidation. When a particular stock posts a decline followed by sideways movement, the appearance at that point of three white soldiers signals that higher prices are likely ahead.

Example

21. Marubozu

• Typically, it is a long candle that implies the day’s trading range has been large. This candle lacks either an upper or lower shadow. On rare occasions it can lack both an upper or lower shadow.
• White candle signals extreme conviction among buyers. Dark candle indicates sellers were eager to flee.

Example

 

There are still a lot of Patterns that you will learn along the way such as the following:
Tweezers
Dumpling Top
Fry Pan Bottom
Tower Top Pattern
Tower Bottom Pattern
Mat Hold Pattern
Above below the Stomach Pattern
Below The Stomach
Thrusting Line
Separating Line Pattern
Three Line Strike
Meeting line pattern
Low price gapping play
High price gapping play
Homing Pigeon pattern
8-10-12-13 New price lines
Scoop pattern
J-Hook pattern and Inverted J-Hook pattern
Cradle pattern
Rising three methods
Falling Three Methods
Deliberation pattern or Stalled pattern
Advance block pattern
Kicker