Hammer
This is a single candlestick reversal pattern made up of a small real body, ideally to be white but could be black, with a long lower shadow but a very short or even non-existent upper shadow. This candlestick should be formed after a decline, the bottom of the shadow marks a new low and then followed by white candlesticks. Therefore this is grouped under bullish reversal patterns.
Doji
Another single candlestick reversal pattern which could be either bullish or bearish, depending on the combinations of the preceding and the subsequent candlesticks formations. A doji star is formed when the opening price and the closing price are virtually the same level (the word doji is actually a Japanese words „同市‟ which means same price level) which made no real body, the length of the upper and lower shadows can vary and the appearance of the candlestick resembles a plus sign, a cross or an inverted cross. One doji star alone is only a neutral pattern as it indicates a sense of indecision between the bulls and bears, whether it is going to be a bullish or bearish sign mainly depends on the prior and future price developments.
Whenever you see a „doji‟ candlestick after certain trending moves, you can consider it as a warning sign or a red flag for a possible reversal and one should wait to see if there is candlestick pointing to the other direction after the doji.
Whenever you see a „doji‟ candlestick after certain trending moves, you can consider it as a warning sign or a red flag for a possible reversal and one should wait to see if there is candlestick pointing to the other direction after the doji.
Morning star
This is basically a three steps bullish reversal pattern at the bottom of a downtrend consisting of three candlesticks, starting with a long real body black candlestick after an extended downtrend, a small body candlestick (could be white or black but a white body tend to have stronger indication) that gapped down on the open and closed below the low price of the previous candlestick (which make that candlestick appears isolated from prior bar), finally a long real body white candle which gapped up on the open and closed near the bar high or at least well above the mid-point of the previous black candle.
If the star itself is a hammer or doji, this normally suggests a stronger reversal signal and the subsequent impact is more likely to be bigger.
If the star itself is a hammer or doji, this normally suggests a stronger reversal signal and the subsequent impact is more likely to be bigger.
Harami
This is s two candlesticks pattern which could be either bullish or bearish depending on the combination of the prior and subsequent candlesticks development. In a downtrend, after a long black-bodied candlestick hitting a new low, the second candlestick has a small white body and is completely confined within the range of the previous candle. The Japanese word „Harami‟ means pregnant, the pattern itself looks like a woman carrying a baby (needs some imaginations).
The subsequent development is also important in order to provide confirmation, the candlesticks after the „Harami‟ should start turning upwards, which means it should be followed by series of white candles.
The subsequent development is also important in order to provide confirmation, the candlesticks after the „Harami‟ should start turning upwards, which means it should be followed by series of white candles.
Bullish Engulfing Pattern
This is a reversal pattern which can be bearish or bullish, when it appears at the end of a downtrend, it would be a bullish engulfing pattern. The pattern starts with a small body candlestick, then followed by a candlestick whose body completely engulfs the previous candle‟s body as buyers outnumber the sellers, this would reflect in the chart by a long white real body candlestick.
Again this pattern needs confirmation and the long white candle should be followed by series of white candlesticks to confirm a low formation.
Again this pattern needs confirmation and the long white candle should be followed by series of white candlesticks to confirm a low formation.