3.

Double Candlestick
Patterns

MY TRADING SCHOOL
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 Introduction. Page 1

Engulfing Patterns. Page 2

•Bullish Engulfing Pattern
•Bearish Engulfing Pattern

Bullish Piercing Line Pattern and

Bearish Dark Cloud Cover Pattern Page 6

Harami Patterns Page 10

•Bullish Reversal and Bearish Continuation
•Bearish Reversal and Bullish Continuation

Star Patterns Page 14

•Bullish Reversal and Bearish Continuation
•Bearish Reversal and Bullish Continuation

Window Patterns. Page 18

·Rising Window
·Falling Window
 INTRODUCTION
When two Candlesticks come together to form a pattern, it is
called a Double Candlestick Pattern.

We will be learning about the following patterns:

1.Bullish and Bearish Engulfing Patterns

2.Bullish Piercing Line and The Bearish Dark Cloud Cover
3.Harami Patterns
Harami Pattern formed at Price Lows - Bullish Reversal
and Bearish Continuation Pattern
Harami Pattern formed at Price Highs - Bearish Reversal
or Bullish Continuation Pattern
4. Star Patterns
Bullish Reversal Pattern and Bearish Continuation Pattern
Bearish Reversal Pattern and Bullish Continuation Pattern
5.Rising and Falling Window Patterns

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 ENGULFING PATTERNS
The Engulfing Patterns are very strong, Trend Reversal Patterns.

Bullish Engulfing Pattern Bearish Engulfing Pattern

Characteristics of the Patterns

This pattern forms when the Second Long Range Candle wraps
around the entire First Small Bodied Candle, including its
shadows.
The signal is very strong when the first candle is small and the
second candle is large.
For this pattern to be significant, it is very important to have a
strong trend preceding it.
These tend to become Support or Resistance levels for future
prices.

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Location where the Pattern is formed is Important

Bearish
Engulfing Pattern

Bullish
Engulfing Pattern

The Bullish Engulfing Pattern forms at price lows after a significant

Downtrend.

Bearish Engulfing Pattern forms at price highs, after a significant

Uptrend.

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 Bullish Engulfing Pattern

This pattern forms after a significant decline in price indicating a

trend reversal in the upward direction.

Formation
The first candle is a Red Small Range Candle.
The second candle opens below the first candle’s body and
rallies upward forming the second Green Long Range Candle.

Thus, the bullish engulfing pattern forms when the first Red SRC is
being engulfed by the Green LRC.

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 Bearish Engulfing Pattern

This pattern forms after a significant advance in price which

signifies a peak or a slowdown in price movement and a sign of a
market downturn.

Formation
The first candle is a Green Small Range Candle.
The second candle opens above the first candle’s body and
crashes downward forming the second Red Long Range Candle.

Thus, the bearish engulfing pattern forms when the first Green SRC
is being engulfed by the Red LRC.
An ideal bearish engulfing pattern has a very large red real body
engulfing a small green real body. The small size of the first small
bodied green candle shows that the momentum of the rally is
dropping. The large red real body after this small candle indicates
that the bears are here to soon take control. The lower the second
candle goes, the more significant the pattern is.

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 BULLISH PIERCING AND
BEARISH DARK CLOUD COVER
The Bullish Piercing Line and its bearish counterpart, the Dark Cloud
Cover are Trend Reversal Patterns. These are not very strong
patterns.

Bullish Piercing Line Pattern Bearish Dark Cloud Cover Pattern

Characteristics of the Patterns

The First Candle is a Long Range Candle.

The Second Candle is also a Long Range Candle, which gaps
above or below the shadow of the first Candle.
The Second Candle retraces the range of the first candle and
closes at atleast, the 50% mark of the first candle’s range.
The more the second candle retraces the first candle, the
better the signal.
These tend to become support and resistance levels for future
prices.

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Location where the Pattern is formed is Important.

Bearish
Dark Cloud Cover Pattern

Bullish
Piercing line Pattern

The Bullish Piercing Line Pattern forms at price lows after a fall in
prices and signals a bullish reversal of the prevailing downtrend.

The Dark Cloud Cover Pattern forms at price highs after a rise in
prices and signals a bearish reversal of the prevailing uptrend.

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 Bullish Piercing Line Pattern

This pattern is a 2 candle pattern which forms after a decline in

prices, at price lows.

Characteristics of the Pattern

The first candle is a red long range candle, which forms in
the direction of the downtrend.
The second candle gaps down on open and then rallies up,
to close at or above the 50% mark of the first red long
range candle.
The more the second candle retraces the first candle, the
better the signal.
The pattern constitutes a red long range candle which is
partially engulfed by a Green long range candle, closing at
or above 50% of the red long range candle.

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 Dark Cloud Cover Pattern

When the same inverted hammer pattern is spotted after an

uptrend or a rally in price, it is called a Shooting Star, which is
a Bearish Reversal Pattern.

Characteristics of the Pattern

It has a Small Real Body.
The Lower Tail is either very small or absent and the
Upper Wick is more than 60% of the range of the candle.
The colour of the body is not important.

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 HARAMI PATTERNS
The Harami Patterns can either signal a Continuation of the ongoing
trend, or a Reversal.
This pattern is a Double Candlestick pattern consisting of a large
body candle, followed by small body candle, which is completely
within the bounds of the first large body candle

Harami Patterns

Characteristics of the Patterns

The First candle is a Long Range candle, which forms in the direction
of the prevailing trend.
The Second candle is a small range candle which closes within the
body of the first long range candle. The smaller the shadows and
shorter the real body of the second candle, the better the signal.
The Second candle can be a Spinning Top, Doji, Hammer, Hanging
man or any other small candle with a small real body.
It is not necessary for upper and lower shadows to be within the body
of the LRC.
The colour of the second candle is not significant, but in case of a
reversal, it is always desirable for the candle to be the colour of the
reversing trend.

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Important pointers which indicate a potential Trend Reversal :

If the entire range of the second real body i.e. the open, close,
high and low is within the prior real body, the chances for a
price reversal increase.
If the second candle is a Doji instead of a small real body, it
increases the probability of reversal. This combination of a
long candle followed by a Doji within the first candles real body
is called Harami Cross.

Harami Cross Patterns

Location where the Pattern is formed is Important

The Harami Pattern formed at Price Lows can be a Bullish Reversal
or a Bearish Continuation Pattern.

The Harami Pattern formed at Price Highs can be a Bearish Reversal

or a Bullish Continuation Pattern.

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Harami Pattern formed at Price Lows
Bullish Reversal and Bearish Continuation Pattern

This pattern forms after a decline in price at supports or in the

middle of the trend.

Formation
The First candle is a Red Long Range Candle.
The Second candle is a red or a green Small Bodied Candle
which is contained within the body of the Red LRC. The colour of
the second candle can be either red or green, but if it is a green
colour, then it is a stronger signal.
If the prices break on the downside, it would be a Bearish
Continuation Pattern and if the prices break on the upside, it
can be a Bullish trend reversal pattern. If the second small
candle forms near the bottom end of the body of the first LRC, it
is called a Low-price Harami.
Bearish Continuation Pattern
If the first candle is a red LRC and the second candle is a doji, it is
called a Harami Cross. The pattern increases the chances of a
reversal in prices.
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 Harami Pattern formed at Price Highs
Bearish Reversal and Bullish Continuation Pattern

This pattern forms after a rally in price at the top of an uptrend or in the
middle of a trend.

Formation
The First candle is a Green Long Range Candle.
The Second candle is a red or a green Small Bodied Candle which is
contained within the body of the Red LRC. The colour of the second
candle can be either red or green, but if it is a red colour, then it is a
stronger reversal signal.
If the prices break on the downside, it will be a bearish reversal
pattern and if the prices break on the upside, it will be a bullish
continuation pattern.

If the second real body of the Harami is near the upper end of the first
real body, it is called High-price Harami since the second sessions price is
in the upper end of the price range.
If the first candle is a green LRC and the second candle is a doji, it is
called a Harami Cross. The pattern increases the chances of a reversal in
prices.
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 STAR PATTERNS
A Star is a Candlestick that has a body which lies outside the range
of the Previous candle’s body. It indicates a sudden halt in the
persisting trend.

Bullish Star Pattern Bearish Star Pattern

Characteristics of the Patterns

The First candle is a Long Range Candle.

The Second candle is a Short Range Candle star.
The Second SRC gaps either up or down depending on the
location of the formation.
The Second Candle’s body should not overlap the First candle’s
body. If the second candle is a Doji, which fulfils all criteria, it is
called a Doji Star.
The colour of the second Candle is not relevant.
This pattern acts as a support or a resistance for future prices.

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Location where the Pattern is formed is Important

A Bullish star pattern formation is seen after a downtrend.

A Bearish star pattern formation is seen after an uptrend.

This pattern can be a Reversal Pattern if the prices break out in

the opposite direction of the ongoing trend.

Or it can be a Continuation Pattern if the prices continue moving

in the same direction of the ongoing trend.

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Star Pattern formed at Price Lows
Bullish Reversal and Bearish Continuation Pattern

Bullish Reversal Bearish Continuation

Star Pattern Star Pattern

This pattern forms after a decline in price at supports or in the

middle of the trend.
It forms when the small bodied candle gaps below the price range of
the previous candle.

Formation
The First Candle is a red LRC which forms in the direction of the
downward move.
The Second Candle is a SRC or a small range candle, which gaps
down.
In the next session, if the prices break on the Downside, it will
be a Bearish Continuation Pattern and if the prices reverse their
direction from down to up, it will be a Bullish Reversal Pattern.

Since this Star Pattern can be a Bullish Reversal or a Bearish

Continuation Pattern, depending on the direction of its breakout, It is
prudent to trade this candlestick pattern only after confirmation.

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 Star Pattern formed at Price Highs
Bearish Reversal and Bullish Continuation Pattern

Bearish Reversal Bullish Continuation

Star Pattern Star Pattern

This pattern forms after a rally in price at the top of an uptrend or in the
middle of a trend.
This pattern forms when the small-bodied candle gaps above the price
range of the previous candle.

Formation
The First Candle is a green LRC which forms in the direction of the
upward move.
The Second Candle is a SRC or a small ranged candle, which gaps up.
In the next session, if the prices break on the upside, it will be a
bullish continuation pattern and if the prices reverse their direction
from up to down, it will be a bearish reversal pattern.

Since this Star Pattern which is formed at price highs, can be a Bearish
Reversal or a Bullish Continuation Pattern, depending on the direction of
its breakout, It is prudent to trade this candlestick pattern only after
confirmation.

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 WINDOW PATTERNS
Windows are also known as Disjointed Candles.
These are very strong continuation patterns, which signal a
continuation of the ongoing trend.

Rising Window Pattern Falling Window Pattern

Characteristics of the Pattern

The First Candle is a Long Range Candle.

Second Candle is also a Long Range Candle, which opens either
gap up or down, depending on the location of the formation.
Windows act as Support and Resistance to future prices

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Location where the Pattern is formed is Important

Rising Window forms between 2 candles rising from Price lows.

Falling Window forms between 2 candles falling from price

highs.

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Rising Window

The Rising Window is a Bullish Pattern.

This pattern forms between candles which are rising from price lows.

Formation
The First candle is a Green LRC.
Second candle is also a Green LRC, which gaps up, above the
first LRC.
The lower shadow of this LRC is above the first LRC’s upper
shadow.

This pattern signifies that the prevailing uptrend would continue.

A Rising window acts as Support to future prices.

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 Falling Window

Falling Window is a Bearish Pattern.

This pattern forms between candles which are falling from price highs.

Formation
The First candle is a Red LRC
Second candle is also a Red LRC, which gaps down, below the first
LRC.
The upper shadow of this second Red LRC is lower than the lower
shadow of the first LRC

This pattern signifies that the prevailing downtrend would continue.

A Falling window acts as Resistance to future prices.

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