CANDLESTICK PATTERNS
Candlestick patterns are a particular graphic representation, where the candles on a chart create a precise figure. Candlestick patterns can indicate a continuation or an inversion of the trend. However, like any indicator, they must be used as an adjunct element along with other indicators. Enjoy with this wonderful list by Educational Trades.
CONTINUATION PATTERNS
Bearish 3
The Bearish 3 is a continuation bearish pattern consisting of two long bearish candles with a series of smaller body candles in the center that usually remain in the range indicated by the first bearish candle.
Bullish 3
Bullish 3 is a bullish continuation pattern and consists of a long bullish candle followed by three bearish candles and another bullish one. Usually, the three smallest candles are within the range of bullish candle prices.
Falling & Rising Three
UPTREND
The first and fifth Candela are bullish, in line with the Trend; they must also be longer than the other Three Candles.
The Second, Third and Fourth Candles are bearish. Furthermore, these Candles must remain inside the Real Body of the First Candle (Or between the High and Low of the First Candle). Finally, they must have the Lowest at the First Candle Open, while the Highs must be lower than the Close of the First Candle.
The Close of the Fifth Candle must be higher than the Close of the First Candle.
DOWNTREND
The first and fifth candle are bearish. They must also be longer than the other Three Candles.
The Second, Third and Fourth Candles are bullish. Furthermore, these Candles must remain inside the Real Body of the First Candle (Or between the High and Low of the First Candle). Finally they must have the Low below the First Candle Open while the Highs must be greater than the Close of the First Candle
The Close of the Fifth Candle must be less than the Close of the First Candle.
In-Neck Line
In the In-Neck line the closure is at the same level as the bearish candle closure.
Ledge
The ledge is a pattern of price consolidation that represents a micro-congestion.
The ledge pattern is formed by a minimum of 4 candles to a maximum of 8. The formation requires that the candles reach twice the same minimum and twice the same maximum, even if not consecutively.
When the formation of the ledge pattern occurs after a rise in prices, it is possible that it precedes the continuation of the bullish movement. Vice versa in a bearish trend.
On Neck Line
The on-neck line pattern is a continuation bearish pattern consisting of two candles: the first, bearish, is followed by a small bullish candle with a closing price very close to the minimum of the first candle.
Separating Lines
In the uptrend phase it consists of a bearish candle followed by a bullish candle with the same opening price as the first.
In the downtrend phase it consists of a bullish candle followed by a bearish candle that opens at the same price as the first.
Side By Side White Lines
UPTREND
The First Candle is bullish, in line with the bullish trend.
Then there is a Gap Up between the First and Second Candle.
The Second and Third Candles are bullish, they have Real Body similar in length; moreover they have the Open at the same level more or less, but it is superior to the Real Body of the First Candle.
DOWNTREND
The First Candle is bearish, in line with the bearish trend.
Then there is a gap down between the first and second candle.
The Second and Third Candles are bearish, they have Real Body similar in length; they also have the Open at the same level more or less, while they have the Close lower than the Real Body of the First Candle.
Three White Soldiers
Three White Soldiers is a bullish continuation pattern consisting of three bullish candles which, consecutively, close each above the closing prices of the previous candle. Probably it is one of the most used candlestick patterns. It can also be a reversal signal if it is preceded by an opposite trend phase.
Thrusting Line
Thrusting Line has the closure within the range of the previous candle. The closure is not higher than the average price, otherwise it is a reversal signal (Piercing Line).
INVERSION PATTERNS
Dark Cloud Cover
Dark Cloud Cover is an inversion pattern that occurs during the uptrend phases. It consists of a long bullish candle followed by another bearish one. Usually, the second candle opens at a higher price than the maximum reached by the first and closes around 50% of the bull candle.
Doji Star
The Doji Star pattern is a reversal signal on the chart that is confirmed by the next candle.
It consists of a Doji candle that forms above or below the previous candle (whether it is bullish or bearish). For example, if the candle following the doji is a bullish type, the pattern will confirm a bullish reversal.
Engulfing
Engulfing patterns are signs of strong reversal and can be either bullish or bearish.
The bullish engulfing pattern consists of a small bearish candle immediately followed by a long bullish candle that "swallows" the price range of the previous candle.
Similarly, the bearish pattern consists of a long bearish candle, preceded by a small bullish candle, contained in the price range of the second candle on the chart.
Evening Doji Star
The Evening doji star pattern falls into the evening star pattern category and is a strong reversal signal consisting of three candles:
- the first, bullish and very long
- the second, a doji candle
- the third, bearish that closes around 50% of the price range of the first.
Evening Star
The evening star pattern is generally an inversion pattern that occurs at the end of a trend. Probably it is one of the most used candlestick patterns.
The evening star pattern consists of three candles:
- the first, bullish and very long
- the second, bullish, but with a shorter body and above the price range of the first
- the third, bearish that closes around 50% of the price range of the first.
Gravestone Doji
Gravestone Doji is an inversion pattern consisting of a doji in which the opening and closing prices represent the minimum of the candle. The longer the shadow, the stronger the bearish signal is.
Hammer
The Hammer is a bullish reversal pattern that is formed during the downtrend phases. Probably it is one of the most used candlestick patterns.
It consists of a bullish candle with a small body with a long lower shadow, while the upper shadow is generally very small or absent.
Hanging Man
The hanging man is a bearish reversal pattern that generally forms at the upper end of the trading range and is characterized by:
- small body
- lower shade twice the length of the body of the candle
- small or non-existent upper shade
Harami
The Harami pattern can be interpreted either as a bullish pattern or as a bearish pattern.
The Harami pattern is interpreted as a bearish pattern when preceded by an uptrend phase. The pattern, in fact, consists of a long bullish candle followed by a bearish candle with a very small body, whose price range is contained in the previous candle.
Bullish Harami is a pattern generally preceded by a downtrend phase. It consists of a long bearish candle (black) followed by another bullish one, smaller and included in the range of the first.
Bearish Harami Cross is a pattern that is interpreted as the possibility of reversal and consists of a doji preceded and included in the range of a long bullish candle.
Bullish Harami Cross is instead an inversion pattern consisting of a long bearish candle followed by a doji (contained in the price range indicated by the first candle).
Morning Doji Star
The "morning doji star" pattern is an inversion pattern consisting of three candles:
- the first, a long bearish candle
- the second, a doji candle below the price range of the first,
- the third is a bullish candle that closes around 50% of the body
Morning Star
The "morning star" pattern is an inversion pattern that is generally formed at the end of a trend; consists of three candles:
- the first, a long bearish candle
- the second, a candle with a small body and generally below the price range of the first,
- the third is a bullish candle that closes around 50% of the body of the first candle.
Piercing Line
The Piercing line pattern is an inversion pattern consisting of two candles: a bearish candle followed by a bullish candle that opens at the lowest price of the first, but closes over half of it.
Reverse Hammer
The reverse hammer is an inversion pattern that appears in the downtrend phase and has the opposite appearance with respect to the hammer.
So a bearish candle with a small body and a higher shadow very pronounced compared to the absence of the lower shadow.
Three Black Crows
The Three black crows pattern is a bearish reversal pattern consisting of three long bearish candles each of which closes below the minimum reached by the previous candle. Probably it is one of the most used candlestick patterns. It can also be a reversal signal if it is preceded by an opposite trend phase.
Three White Soldiers
Three White Soldiers a bullish continuation pattern consisting of three bullish candles which, consecutively, close each above the closing prices of the previous candle. It can also be a reversal signal if it is preceded by an opposite trend phase.
Tweezers
Tweezers are reversal patterns consisting of two candles that can form after an uptrend or downtrend phase indicating the impending reversal. The tweezer pattern can be top, or bottom.
Tweezer Top is an inversion pattern consisting of two candles that have very similar maxima.
The Tweezer Bottom, however, generally consist of two candles that have the same lower price level; moreover, the size and color of the candles is irrelevant.