Candlestick Patterns Overview
Candlestick patterns are crucial tools in technical analysis, helping traders predict potential market movements. These patterns can signal bullish, bearish, or neutral sentiment, guiding traders in decision-making.
Bullish Candlestick Patterns:
Bullish patterns indicate a possible upward movement, often appearing at the bottom of a downtrend and signaling a reversal.
Hammer: Forms at the bottom of a downtrend, with a small body and a long lower wick, suggesting a potential reversal to the upside.
Inverted Hammer: Similar to the hammer but with a long upper wick, indicating a possible upward reversal after a downtrend.
Bullish Engulfing: A small bearish candle is followed by a larger bullish candle that fully engulfs it, signaling a reversal to the upside.
Tweezer Bottom: Composed of two or more candles with matching lows, hinting at a possible end to the downtrend.
Morning Star: A three-candle pattern starting with a long bearish candle, followed by a small or doji candle, and ending with a long bullish candle, suggesting a reversal to an uptrend.
Stars in the South: A rare pattern, signaling strong support and the potential for upward movement when appearing in a downtrend.
Neutral Candlestick Patterns:
Neutral patterns reflect indecision in the market, signaling either a continuation or a reversal, depending on subsequent price action.
Doji: Occurs when the opening and closing prices are nearly equal, forming a cross-shaped candle, which signals market indecision.
Gravestone Doji: A bearish reversal signal, characterized by a long upper wick and the open/close at the low of the day.
Dragonfly Doji: Suggests a potential bullish reversal, with a long lower wick and the open/close near the high of the day.
Bearish Candlestick Patterns:
Bearish patterns indicate possible downward movement and tend to appear at the top of an uptrend, signaling a reversal.
Hanging Man: Appears at the top of an uptrend, with a small body and a long lower wick, indicating a potential downward reversal.
Shooting Star: Forms at the peak of an uptrend, featuring a small body and a long upper wick, suggesting a weakening of the uptrend and a potential decline.
Bearish Engulfing: A small bullish candle is engulfed by a larger bearish candle, signaling a potential reversal to the downside.
Tweezer Top: Comprises two or more candles with matching highs, suggesting a possible reversal of the uptrend.
Evening Star: A three-candle pattern, starting with a bullish candle, followed by a small or doji candle, and ending with a bearish candle, indicating a reversal to the downside.
Advance Block: A series of three bullish candles, each closing higher but with diminishing momentum, signaling a potential reversal.
These candlestick patterns are essential for traders, helping them identify potential reversals, continuations, and trend changes in the market.
