Candlestick Pattern: Bullish & Bearish Candlestick Pattern

A candlestick pattern is a visual representation of data concerning the price movement of an item. One of the most well-liked elements of technical analysis are candlestick charts, which allow traders to quickly and accurately understand price information from a small number of price bars.

In the daily chart that is the subject of this article, each candlestick represents a single trading day. It has three essential attributes:

  • The Body, which represents the open-to-close range
  • The Wick, or shadow, that indicates the intra-day high and low
  • The Colour, it indicates how the market is moving. An increase in price is denoted by a green (or white) body, whereas a fall in price is denoted by a red (or black) body.

Individual candlesticks develop patterns over time that traders can use to identify key levels of support and resistance. Numerous candlestick patterns can be used to detect opportunities in a market; some show how the buying and selling pressures are balanced, while others show continuation patterns or market hesitation.

It’s crucial to familiarize yourself with the fundamentals of candlestick patterns and how they might guide your trading selections before you begin.

Six Bullish Candlestick Patterns:

After a market decline, bullish patterns may appear and indicate a change in the direction of price movement. Using them as a guide, traders can decide whether to start a long position in order to benefit from any upward trend.

Hammer:

At the bottom of a downward trend, the hammer candlestick pattern is produced by a short body and a lengthy lower wick.

A hammer indicates that even though there were selling pressures throughout the day, the price was ultimately driven back up by significant purchasing demand. Red hammers signal a weaker bull market than green hammers, though the body hue might vary.

Inverse Hammer:

The inverted hammer pattern is also bullish. The upper wick’s length compared to the lower wick’s shortness is the only distinction.

It denotes a buying push that was followed by a weak selling pressure that failed to lower the market price. The inverse hammer predicts that buyers will take over the market shortly.

Bullish Engulfing:

Two candlesticks come together to form a bullish engulfing pattern. A taller green candle totally engulfs the shorter red body of the first candle.

Despite the fact that the second day starts lower than the first, the bullish market drives the price upward, resulting in a clear victory for buyers.

Piercing Line:

Another two-stick motif, the piercing line is composed of a long red candle and a long green candle.

The closing price of the first candlestick and the opening price of the green candlestick typically have a sizable downward gap. The price being pushed up to or above the mid-price from the previous day suggests there is significant purchasing pressure.

Morning Star:

In a depressing market decline, the morning star candlestick pattern is regarded as a sign of optimism. A short-bodied candle is sandwiched between a long red and a long green in a three-stick arrangement. Since the market gaps both on open and close, the “star” won’t typically overlap with the longer bodies.

It indicates that a bull market is approaching and that the selling impetus from the first day has subsided.

Three White Soldiers:

Over the course of three days, there are three white troops. It consists of a series of long, green (or white), wickless candles that open and close higher than the day before.

After a decline, there is a very strong positive signal that arises, indicating a gradual increase in buying demand.

Six Bearish Candlestick Patterns:

After an uptrend, bearish candlestick patterns typically appear and indicate a point of resistance. Traders who are overly pessimistic about the market’s price frequently close their long bets and start short positions in order to profit from the market’s decline.

Hanging Man:

The hanging man, which has the same shape as a hammer but only appears towards the end of an uptrend, is the bearish equivalent.

It shows that there was a sizable sell-off during the day but that buyers were successful in driving the price back up. The significant sell-off is frequently interpreted as a sign that the market is losing ground to the bulls.

Shooting Star:

Similar to the inverted hammer in shape, the shooting star is generated during an uptrend and has a short lower body and a lengthy upper wick.

The market will typically start slightly higher, surge to an intraday high, then close at a price just above the open, like a star plummeting to earth.

Bearish Engulfing:

An uptrend comes to an end when a bearish engulfing pattern forms. A succeeding long red candle surrounds the smaller green body of the initial candle.

It denotes a price peak or slowdown and is an indication of a coming market decline. The trend is more likely to be substantial the lower the second candle descends.

Evening Star:

The bullish morning star’s counterpart, the evening star is a three-candlestick pattern. It is made out of a big red candlestick, a long green candle, and a short candle sandwiched between them.

When the third candlestick reverses the gains of the first candle, it strongly suggests the reversal of an uptrend.

Three Black Crows:

Three consecutive long red candles with short or no wicks make up the three black crows candlestick motif. Each session begins at a price that is identical to the previous one, but as each session comes to a close, selling forces drive the price still lower.

Due to the fact that selling have surpassed buyers during the last three trading days, traders interpret this pattern as the beginning of a bearish decline.

Dark Cloud Cover:

The dark cloud cover candlestick pattern denotes a bearish reversal, casting a gloomy pall over the optimism of the day before. It consists of two candlesticks: one red and one green. The red candlestick opens above the green body’s middle and closes below it.

It indicates that the bears are in control of the session and have driven the price much down. The short wicks of the candles indicate that the downturn was very strong.

Four Continuation Candlestick Patterns:

A candlestick pattern is referred to as a continuation pattern if it doesn’t signal a shift in the market’s direction. These can aid traders in spotting a market lull during which there is price hesitation or neutral movement.

Read More Introduction to Stock Chart Patterns: A Complete Guide to Analyzing Market Trends

Doji:

The candlestick looks like a cross or plus sign when a market’s open and close are nearly the same price point. Traders should watch out for a short to nonexistent body and wicks of variable lengths.

The shape of this doji represents a struggle between buyers and sellers where neither party gains anything in the end. A doji by itself is a neutral indication, however reversal patterns like the bullish morning star and bearish evening star might contain one.

Spinning Top:

The short body of the spinning top candlestick pattern is positioned in the middle of two wicks of similar length. The pattern shows market hesitation, which prevented a major movement in price: the bulls drove up the price while the bears drove it down once more. Spinning tops are frequently seen as a consolidation or resting period that comes after a big rally or decline.

The spinning top is a generally benign indicator on its own, but because it indicates that the current market pressure is waning, it can be seen as a portent of future events.

Falling Three Methods:

The continuation of a present trend, whether bullish or negative, is forecast using three-method formation patterns.

The ‘falling three methods’ pattern is a bearish one. It is composed of a lengthy red body, three brief green bodies, another red body, and three green candles that are all contained inside the bearish bodies’ range. Traders can see that the bulls lack the power necessary to change the trend.

Rising Three Methods:

The ‘rising three methods’ candlestick pattern, a bullish pattern, is the exact opposite. Three short reds are sandwiched between two lengthy greens in this arrangement. The pattern demonstrates to traders that buyers are still in charge of the market despite some selling pressure.

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