Here’s a quick lesson on 14 important candlestick patterns and what they mean for the market.
Ready…set…go!
1) Bullish Marabuzo
Number of candles: 1
Description: Long green candle that opens near its low and closes near its high
Implications: Bullish
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2) Bearish Marabuzo
Number of candles: 1
Description: long red candle that opens near its high and closes near its close
Implications: Bearish
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3) Doji
Number of candles: 1
Description: Candle that closes near where it opened
Implications: Reversal
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NEXT: Shooting Star, Hammer, and More
|pagebreak|4) Shooting Star
Number of candles: 1
Description: Candle that closes near where it opened, at the bottom of the period’s range
Implications: Bearish Reversal (in an uptrend)
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5) Hammer
Number of candles: 1
Description: Candle that closes near where it opened, at the top of the period’s range
Implications: Bullish Reversal (in a downtrend)
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6) Hanging Man
Number of candles: 1
Description: Candle that closes near where it opened, at the top of the period’s range
Implications: Bearish Reversal (in an uptrend—only weak effectiveness)
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NEXT: Inverted Hammer, Engulfing Patterns, and More
|pagebreak|7) Inverted Hammer
Number of candles: 1
Description: Candle that closes near where it opened, at the bottom of the period’s range
Implications: Bullish Reversal (in a downtrend—only weak effectiveness)
Click to Enlarge
8) Bullish Engulfing Pattern
Number of candles: 2
Description: Green candle with a lower open and a higher close than the previous candle
Implications: Bullish Reversal (in a downtrend)
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9) Bearish Engulfing Pattern
Number of candles: 2
Description: Red candle with a higher open and a lower close than the previous candle
Implications: Bearish Reversal (in an uptrend)
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NEXT: Harami, Dark Cloud Cover, and More
|pagebreak|10) Harami
Number of candles: 2
Description: Candle with a real body contained within the range of the prior real body (which must have moved in the direction of the prior trend)
Implications: Reversal (only weak effectiveness)
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11) Dark Cloud Cover
Number of candles: 2
Description: Red candle with a higher open than the previous candle, but a close in the bottom half of that prior candle.
Implications: Bearish Reversal (in an uptrend)
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12) Piercing Pattern
Number of candles: 2
Description: Green candle with a lower open than the previous candle, but a close in the top half of that prior candle
Implications: Bullish Reversal (in a downtrend)
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NEXT: Article Concludes with Morning and Evening Star Patterns
|pagebreak|13) Morning Star
Number of candles: 3
Description: Long red candle followed by a small-bodied candle that gaps lower. The third candle closes in the top half of the first candle
Implications: Bullish Reversal (in a downtrend)
Click to Enlarge
14) Evening Star
Number of candles: 3
Description: Long green candle followed by a small-bodied candle that gaps higher. The third candle closes in the bottom half of the first candle
Implications: Bearish Reversal (in a downtrend)
Click to Enlarge
By Graham Neary, MSTA of FuturesTechs.com
