Candlestick Patterns:

In financial technical analysis, a candlestick pattern is a movement

in prices shown graphically on a candlestick chart that some believe
can predict a particular market movement. Looking at a
single candlestick, a trader can gain valuable information about the
battle between buyers and sellers during a trading period.

o Bullish candle patterns.

o Bearish candle patterns.

o Neutral candle patterns.
 Bullish Candle.
➢ A bullish candle pattern informs traders that the market is about to enter an
uptrend after a previous decrease in prices.
➢ Bullish patterns form after a market downtrend, and signal a reversal of price
movement.
➢ This reversal pattern is a signal that bulls are taking over the market and could
even push the prices up further – marking the time to open a long position.
 Types Of Bullish Candlestick

❖ Bullish Candle.

❖ Hammer.

❖ Bullish Engulf.

❖ Bullish Piercing.

❖ Morning Star.
 Hammer.
➢ A Hammer candlestick pattern typically has a small body and a long lower
wick/shadow. The lower wick/shadow is generally 2-3 times of the body.
➢ They are considered as a potential bullish reversal sign when found at the
bottom of a down-trend.
 Bullish Engulf.
➢ Bullish Engulf is a two-candlestick pattern where the first candle is a normalBearish
candle and the second candle is a Bullish candle.
➢ In ideal situations the second candle opens with a gap-down however, it canalso
open at the same level as the close of the bearish candle and it should close above
the open of the first bearish candle thereby, engulfing it.
 Bullish Piercing.
➢ Bullish Piercing is a two-candlestick pattern where the first candle is a
normal Bearish candle and the second candle is a Bullish candle.
➢ In ideal situations the second candle opens with a gap-down however, it can also
open at the same level as the close of the bearish candle.
➢ Most importantly, the bullish should close above the median of the bearish
candle.
 Morning Star.
➢ Morning Star is a 3 candle-stick pattern where the first candle is a normalbearish
candle.
➢ The second candle, typically, is a neutral candle-stick pattern that opens witha gap-
down whose low will mostly be lower as compared to the low of the first bearish
candle (color of the neutral candle doesn't matter).
➢ The third candle is a bullish candle which opens with a gap-up and closesabove the
median of the first bearish candle.
 Bearish Candle.
➢ A bearish candle pattern is a technical chart pattern that signals
lower prices to come.
➢ If the closing price is below the opening price, a bearish
candlestick forms.
 Bearish Candlestick Patterns:

❖ Bearish Candle.

❖ Inverted Hammer.

❖ Bearish Piercing.

❖ Bearish Engulf.

❖ Evening Star.
 Inverted Hammer.

➢ An Inverted Hammer candlestick pattern typically has a small body and a longupper
wick/shadow. The upper wick/shadow is generally 2-3 times of the body. They’re
also called Shooting Star when found at the top.
➢ They are considered as a potential bearish reversal sign when found at the top of the
up-trend.
 Bearish Piercing.

➢ Bearish Piercing is a two-candlestick pattern where the first candle is a

normal Bullish candle and the second candle is a Bearish candle.
➢ In ideal situations the second candle opens with a gap-up however, it can also open
at the same level as the close of the bullish candle.
➢ Most importantly, the bearish should close below the median of the bullish
candle.
 Bearish Engulf.
➢ Bearish Engulf is a two candlestick pattern where the first candle is a normal
Bullish candle and the second candle is a Bearish candle.
➢ In ideal situations the second candle opens with a gap-up however, it can
also open at the same level as the close of the Bullish candle and it should
close below the open of the first Bullish candle thereby, engulfing it.
 Evening Star.
➢ Evening Star is a 3 candle-stick pattern where the first candle is a normalbullish
candle.
➢ The second candle, typically, is a neutral candle-stick pattern that opens witha gap-
up who’s high will mostly be higher as compared to the high of the first bullish
candle (color of the neutral candle doesn't matter).
➢ The third candle is a bearish candle which opens with a gap-down and closesbelow
the median of the first bullish candle.
 Neutral Candlestick Patterns

The neutral doji is a indecisive pattern that's preceded by a bullish or bearish trend,
signaling that the current trend is about to change direction. Doji’s are also considered
so-called “indecision” patterns, meaning that they show that the market doesn't know
which way to go.

Types of Neutral Candles:

❖ Doji.
❖ Spinning Tops.
❖ Harami.
 DOJI.
➢ A Doji candlestick forms when a security's open and close are virtually
equal for the given time period and generally signals a reversal pattern for
technical analysts.
➢ In Japanese, “Doji" means blunder or mistake, referring to the rarity of having
the open and close price be exactly the same.
 SPNNING TOPS
➢ A spinning top is a candlestick pattern that has a short real body that's
vertically centered between long upper and lower shadows.
➢ The candlestick pattern represents indecision about the future direction
of the asset. It means that neither buyers nor sellers could gain the upper
hand.
HARAMI
 Time Frames:

A time frame refers to the amount of time that a trend lasts for in a market, which
can be identified and used by traders. These time frames can range from minutes
or hours to days or weeks, or even longer.

• Monthly Chart
• Weekly Chart
• Daily Chart
• Hourly Chart
• 15 minute, 5 minutes, 1 minutes etc.

❖ Each bar / candle represents price for the specific timeframe. E.g. In daily chart “each”
candle represents price for the day i.e. open, high, low & close of the day
 Trend Lines: Support & Resistances
A trendline is a line drawn over highs or under lows to show the direction of price. Trendlines
are a visual representation of support and resistance in any time frame. They show direction and
speed of price, and also describe patterns during periods of price contraction.

Support Trend Line:

– plot a line joining lows of the trend
Resistance Trend Line:
– plot a line joining highs of the trend
Trading Range or Channel:
– often stocks move in a channel defined by support and resistance lines

Breakout / Breakdown:
– When pressure builds (on either side) stock price breaks out/down of the range.
– They are often trend reversal signs and provide buy or sell confirmations.
SUPPORT TRENDLINE.
HORIZONTAL SUPPORT LINE
 Support Turning into Resistance
When a stock breaks the support line with reasonable volume, the support turns into resistance.
Resistance Trend Line - Example

RESISTANCE TREND LINE

HORIZONTAL RESISTENCE LINE
RESISANCE TURNED INTO SUPPORT
 VOLUME.
• VOLUME reflects the INTENSITY of the price move.
• VOLUME give a clue the genuineness of the BREAKOUT or BREAKDOWN.
• VOLUME is a key indicator to determine reversals.
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