Stock Trends Candlestick Patterns

A candlestick is a type representing the price chart of stock. It is useful in finding patterns and predicting the future movement of the stock. It consists of 3 parts:

• Body: Represents the open-to-close range
• Wick:  Indicates the intra-day high and low
• Colour: Green or Red depending on whether a price has increased or decreased

Candlestick Patterns:

Candlestick Patterns can be categorized into 3 types :

• Bullish: Patterns that predict that the price will increase
• Neutral: Patterns that predict that the price will continue the trend.
• Bearish: Patterns that predict that the price will decrease

Bullish Candlestick Patterns:

1. Bullish Hammer: This is formed when the body is short and the wick is longer. This indicates buyers are able to dominate the sellers and the price will move upwards.
2. Inverted Hammer: Similar to hammer but the body is inverted. This indicates that although sellers are present buyers will eventually gain control and the price will move upwards.
3. Bullish Engulfing: When the current day’s candle engulfs(completely covers) the previous day’s candle.
4. Piercing Line: It is also a two-stick pattern, made up of a long red candle, followed by a long green candle. A significant gap exists between the first candlestick’s closing price and the green candlestick’s opening. It indicates a strong buying pressure.
5. Morning Star: It is formed after a downward trend and it indicates the start of an upward climb. It is a sign of a reversal in the previous price trend.
6. Three White Soldiers: When 3 consecutive candles are green it indicates strong buying pressure and the price will continue upwards.

BULLISH CANDLESTICK PATTERNS

Bearish Candlestick Patterns:

1. Hanging Man: Similar to bullish hammer but it is formed at the end of an uptrend and signals the reversal in the trend towards bearish.
2. Shooting Star: Similar to inverted hammer but formed at the end of an uptrend. Signals the fall of price from the top.
3. Bearish Engulfing: When the current day’s candle engulfs(completely covers) the previous day’s candle.
4. Dark Cloud Cover: Indicates a bearish reversal – a black cloud over the previous day’s optimism. It comprises two candlesticks: a red candlestick that opens above the previous green body and closes below its midpoint.
5. Evening Star: It is formed after an upward trend and it indicates the start of a downward fall. It is a sign of a reversal in the previous price trend.
6. Three Black Crows: When 3 consecutive candles are red it indicates strong selling pressure and the price will continue downwards.

BEARISH CANDLESTICK PATTERNS

Neutral Candlestick Patterns:

1. Doji: When a stock’s open and close prices are almost at the same price point.

2. Spinning Top: Short body with a long wick both above and below the body. Indicated indecision state.