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In this case, you see a bullish single-bar pattern.

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  • Candlestick Patterns!

Buyers bid prices higher throughout the day. Bears holding short positions were hurt where it hurts the most — in their pocketbooks. A trader takes a short position by borrowing shares of stock and selling them in the hope of making money if the stock price falls. Even though the stock opens at the extreme low and closes at its extreme high, the pattern nevertheless is just as bullish when the stock opens near its low and then closes near its high. This is a bearish single-bar pattern. Closing near the low is good enough. A reversal bar is another single-bar pattern that shows a stock opening and closing at the same end of its trading range.

This is a bullish single-bar reversal where the stock opens at the high, trades lower through part of the day, and by the close, the stock regains all its losses and closes at its highest intraday price. During the early part of the trading sessions depicted in the bullish reversal pattern, buyers were willing to buy only if sellers lowered their offering prices. By the end of the day, the tide had turned and roles were reversed, with sellers willing to sell only at higher prices. This situation is another win for the bulls, because they were able to stop the price slide and recover intraday losses.

Here, you can see a bearish reversal pattern. The morning star candlestick pattern is considered a sign of hope in a bleak market downtrend. It is a three-stick pattern: one short-bodied candle between a long red and a long green. It signals that the selling pressure of the first day is subsiding, and a bull market is on the horizon.

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The three white soldiers pattern occurs over three days. It consists of consecutive long green or white candles with small wicks, which open and close progressively higher than the previous day. It is a very strong bullish signal that occurs after a downtrend, and shows a steady advance of buying pressure. Bearish candlestick patterns usually form after an uptrend, and signal a point of resistance. Heavy pessimism about the market price often causes traders to close their long positions, and open a short position to take advantage of the falling price.

The hanging man is the bearish equivalent of a hammer; it has the same shape but forms at the end of an uptrend. It indicates that there was a significant sell-off during the day, but that buyers were able to push the price up again. The large sell-off is often seen as an indication that the bulls are losing control of the market. The shooting star is the same shape as the inverted hammer, but is formed in an uptrend: it has a small lower body, and a long upper wick.

Usually, the market will gap slightly higher on opening and rally to an intra-day high before closing at a price just above the open — like a star falling to the ground. A bearish engulfing pattern occurs at the end of an uptrend. The first candle has a small green body that is engulfed by a subsequent long red candle. It signifies a peak or slowdown of price movement, and is a sign of an impending market downturn. The lower the second candle goes, the more significant the trend is likely to be.

The evening star is a three-candlestick pattern that is the equivalent of the bullish morning star. It is formed of a short candle sandwiched between a long green candle and a large red candlestick.

It indicates the reversal of an uptrend, and is particularly strong when the third candlestick erases the gains of the first candle. The three black crows candlestick pattern comprises of three consecutive long red candles with short or non-existent wicks. Each session opens at a similar price to the previous day, but selling pressures push the price lower and lower with each close. Traders interpret this pattern as the start of a bearish downtrend, as the sellers have overtaken the buyers during three successive trading days. It comprises two candlesticks: a red candlestick which opens above the previous green body, and closes below its midpoint.

Six bullish candlestick patterns

It signals that the bears have taken over the session, pushing the price sharply lower. If the wicks of the candles are short it suggests that the downtrend was extremely decisive. These can help traders to identify a period of rest in the market, when there is market indecision or neutral price movement. Alone a doji is neutral signal, but it can be found in reversal patterns such as the bullish morning star and bearish evening star. The spinning top candlestick pattern has a short body centred between wicks of equal length.

The pattern indicates indecision in the market, resulting in no meaningful change in price: the bulls sent the price higher, while the bears pushed it low again. Spinning tops are often interpreted as a period of consolidation, or rest, following a significant uptrend or downtrend.

16 Candlestick Patterns Every Trader Should Know | IG US

On its own the spinning top is a relatively benign signal, but they can be interpreted as a sign of things to come as it signifies that the current market pressure is losing control. Three-method formation patterns are used to predict the continuation of a current trend, be it bearish or bullish. It is formed of a long red body, followed by three small green bodies, and another red body — the green candles are all contained within the range of the bearish bodies. It shows traders that the bulls do not have enough strength to reverse the trend.

It comprises of three short reds sandwiched within the range of two long greens. The pattern shows traders that, despite some selling pressure, buyers are retaining control of the market. The best way to learn to read candlestick patterns is to practise entering and exiting trades from the signals they give. When using any candlestick pattern, it is important to remember that although they are great for quickly predicting trends, they should be used alongside other forms of technical analysis to confirm the overall trend.

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Gap (chart pattern)

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