Stock Market Chart Patterns
Introduction Stock Market Chart Patterns
First and foremoset, Transitions between rising and sliding trends are frequently indicated by Stock Market Chart Patterns. Above all, Using a sequence of trendlines and/or curves, one can identify price Chart Patterns, which is an identifiable configuration of price movement.
Subequently, A continuation pattern develops when the trend continues in its current direction after a brief pause; a reversal pattern emerges when a price pattern signifies a shift in trend direction. Finally, There are several Stock Market Chart Patterns, that traders use; here is how some of the more well-known patterns are created.
Even so, Technical analysts utilise candlesticks to discover trading patterns that assist them to put up transactions. conversely, These candlestick patterns are used to forecast the direction of price movements in the future.
Alternatively, Candlestick patterns are created by arranging two or more candles in a specific pattern. Whereas, A single candlestick can sometimes send out tremendous indications.
Overview
Transitions between rising and declining trends are frequently suggested by price patterns in technical analysis. Previoously, A pricing pattern is defined as a recognised pattern of price movement that may be determined using a sequence of trendlines and/or curves.
At this time, A reversal pattern happens when a price pattern suggests a shift in trend direction; a continuation pattern occurs when the trend continues in its current direction after a brief break.
How to Read Candlestick Stock Market Chart Patterns?
In contrast, Candlestick charts established in Japan over a century before bar charts and point-and-figure charts were invented in the West. In, 1700s, a Japanese man named Homma observed that, while there was a link between rice price and supply and demand, the markets were also heavily impacted by traders’ emotions.
Despite, The open, high, low, and close prices of an asset are displayed on a daily candlestick chart. Nonetheless, The “true body” of a candlestick is the wide or rectangle component that illustrates the link between opening and closing prices.
On the other hand, The price range between the open and close of that day’s trade is represented by this genuine body.
Nevertheless, The bearish candle is formed when the true body is filled, black or red, indicating that the closure is lower than the open. Additionally, It demonstrates that the prices opened higher, but the bears pushed them lower, and the prices closed lower than the opening price.
In addition to this If the true body is empty, white, or green, the close was higher than the open, indicating a bullish candle. Not only… but also It shows that the bulls pushed the prices up and that the prices closed higher than the beginning price.
Table of contents
Types of Candlestick Patterns:
- 1. Hammer:
- 2. Piercing Pattern:
- 3. Bullish Engulfing:
- 4. The Morning Star:
- 5. Three White Soldiers:
- 6. White Marubozu:
- 7. Three Inside Up:
- 8. Bullish Harami:
- 9. Tweezer Bottom:
- 10. Inverted Hammer:
- 11. Three Outside Up:
- 12. On-Neck Pattern:
- 13. Bullish Counterattack-
- Bearish Candlestick Pattern:
- 14. Hanging man:
- 15. Dark cloud cover:
- 16. Bearish Engulfing:
- 17. The Evening Star:
18. Three Black Crows:
19. Black Marubozu:
20. Three Inside Down:
21. Bearish Harami:
22. Shooting Star:
23. Tweezer Top:
24. Three Outside Down:
25. Bearish Counterattack-
Continuation Candlestick Patterns:
26. Doji:
27. Spinning Top:
28. Falling Three Methods:
29. Rising Three Methods:
30. Upside Tasuki Gap:
31. Downside Tasuki Gap:
32. Mat-Hold-
33. Rising Window-
34. Falling Window-
35. High Wave-
The higher shadow depicts the trading session's peak price, while the lower shadow depicts the trading session's low price.
Before we begin learning about various candlestick charts, in fact, there are a few assumptions to keep in mind that are unique to candlestick charts.
- A bullish or green candle represents strength, while a bearish or red candle represents weakness. When buying, make sure it’s a green candle day, and when selling, make sure it’s a red candle day.
- Although the textbook definition of a pattern specifies specific criteria, it is important to note that minor deviations in the pattern may occur based on market conditions.
- It’s a good idea to seek for a previous trend. The prior trend should be bearish if you’re looking for a bullish reversal pattern, and the prior trend should be bullish if you’re seeking for a bearish reversal Stock Market Chart Patterns.
Types of Candlestick Patterns:
The candlestick patterns can divide into:
- Continuation Patterns
- Bullish Reversal Patterns
- Bearish Reversal Patterns
Bullish Reversal Candlestick Patterns:
Bullish reversal candlestick patterns signal that the current slump is about to turn upwards.
When bullish reversal Candlestick Stock Market Chart Patterns, appear, traders as a result, should be wary about their short bets.
The various forms of bullish reversal candlestick patterns are shown below:
1. HAMMER:
A single candlestick pattern that forms at the conclusion of a downtrend and signifies a bullish reversal is known as a hammer. This candle’s genuine body is small and positioned at the top, with a lower shadow that should be more than twice the size of the real body. The upper shadow on this candlestick chart pattern is either absent or minimal.
The psychology behind this candle pattern is that prices opened, and sellers pushed prices down. Suddenly, buyers entered the market, pushing prices higher and closing the trading session at a higher level than the beginning price.
This resulted in the construction of a bullish pattern, indicating that buyers have returned to the market and the downtrend may be coming to a conclusion.
If a bullish candle forms the next day, traders can enter a long position with a stop–loss near the Hammer’s low.
An example of a Hammer candlestick pattern is shown below:
2. Piercing Pattern:
A piercing pattern is a multiple candlestick chart pattern that indicates a bullish reversal following a decline.
It is formed by two candles, the first of which is a bearish candle, indicating that the downturn will continue.
The second candle is a bullish candle that opens the gap down but closes more than half of the preceding candle’s genuine body, indicating that the bulls have returned to the market and a positive reversal is imminent.
If a bullish candle forms the next day, traders can open a long position with a stop-loss at the low of the second candle.
A Piercing Candlestick Pattern is seen below:
3. Bullish Engulfing:
Bullish Engulfing is a multiple candlestick chart pattern that indicates a bullish reversal following a decline.
It is made up of two candles, with the second candlestick swallowing the first. The first candle is a bearish candle, indicating that the slump will continue.
The second candlestick is a long bullish candle that totally engulfs the first and signals the return of the bulls to the market.
If a bullish candle forms the next day, traders can open a long position with a stop-loss at the low of the second candle.
An example of a Bullish Engulfing Candlestick Pattern show below:
4. The Morning Star:
After a downturn, the Morning Star is a multiple candlestick chart pattern that signals a bullish reversal.
It is made up of three candlesticks, the first of which is a bearish candle, the second of which is a Doji, and the third of which is a bullish candle.
The first candle indicates that the downturn is continuing. The fact that the second candle is a doji shows that the market is indecisive. The third bullish candle indicates that the bulls have re-entered the market and that a reversal is imminent.
The second candle should be fully separate from the first and third candles’ true bodies.
If a bullish candle forms the next day, traders can open a long position with a stop-loss at the low of the second candle.
An example of a Morning Star Candlestick Charts Pattern is shown below:
5. Three White Soldiers:
After a downtrend, the Three White Soldiers is a multiple candlestick pattern that indicates a bullish reversal.
Three long bullish bodies with no long shadows and open within the true body of the previous candle in the pattern make up these candlestick charts.
6. White Marubozu:
After a downturn, the White Marubozu is a single candlestick pattern that indicates a bullish reversal.
This candlestick has a lengthy bullish body with no upper or lower shadows, indicating that the bulls are applying buying pressure and that the markets are likely to turn bullish.
7. Three Inside Up:
After a downturn, the Three Inside Up is a multiple candlestick pattern that indicates a bullish reversal.
It consists of three candlesticks: the first is a long bearish candle, the second is a little bullish candle that should be in the same range as the first candlestick, and the third candlestick is a small bullish candle that should be in the same range as the first candlestick.
A long bullish candlestick should be used as the third candlestick to confirm the bullish reversal.
The first and second candlesticks should have a bullish harami candlestick pattern relationship.
After this candlestick pattern is completed, traders can take a long position.
8. Bullish Harami:
After a slump, the Bullish Harami is a multiple candlestick chart pattern that indicates a bullish reversal.
It is made up of two candlestick charts, the first of which is a tall bearish candle and the second of which is a little bullish candle that should be in the same range as the first.
The first bearish candle indicates that the bearish trend is continuing, while the second bearish candle indicates that the bulls have returned to the market.
After this candlestick pattern is completed, traders can take a long position.
9. Tweezer Bottom:
The Tweezer Bottom candlestick pattern is a bullish reversal pattern that appears at the bottom of a downtrend.
It is made up of two candlesticks, the first of which is bearish and the second of which is bullish.
Both candlesticks make very identical lows.
The prior trend is a decline when the Tweezer Bottom candlestick pattern is established.
A bearish tweezer candlestick appears, indicating that the current decline will continue. The second day’s bullish candle’s low signals a support level the next day.
The bottom-most candles with nearly identical lows show the strength of the support and also imply that the downtrend may be reversing to build an uptrend.
10. Inverted Hammer:
At the end of a downtrend, an Inverted Hammer forms, signalling a bullish turnaround.
The real body is at the end of this candlestick, and there is a long higher shadow. The Hammer Candlestick pattern is the inverse of this pattern.
When the starting and closing prices are close to each other, this pattern is generated, and the upper shadow should be more than double the genuine body.
11. Three Outside Up:
After a downturn, the Three Outside Up is a multiple candlestick pattern that indicates a bullish reversal.
It is made up of three candlesticks, the first of which is a small bearish candle and the second of which is a massive bullish candle that should cover the first.
A long bullish candlestick should be used as the third candlestick to confirm the bullish reversal.
The first and second candlestick charts should have a Bullish Engulfing candlestick pattern relationship.
After this candlestick pattern is completed, traders can take a long position.
12. On-Neck Pattern:
After a downtrend, a lengthy real bodied bearish candle is followed by a smaller real bodied bullish candle that gaps down on the open but closes near the prior candle’s close, forming the on neck pattern.
Because the two closing prices are the same or nearly the same across the two candles, forming a horizontal neckline, the pattern is called a neckline.
13. Bullish Counterattack-
The bullish counterattack pattern is a bullish reversal pattern that foreshadows a reversal of the market’s current slump. This is a two-bar candlestick pattern that develops when the market is in a decline. To be considered a bullish counterattack pattern, a Stock Market Chart Patterns, must match the following criteria.
For the bullish counterattack pattern to occur, the market must be in a significant decline.
The first candle must have a real body and be a long black candle.
The second candle must be a long white candle with a true body (preferably, it should be the same size as the first candle). The second candle must burn out about the same time as the first.
Bearish Candlestick Pattern:
Bearish Reversal candlestick patterns signal that the current upswing is about to turn down.
When bearish reversal candlestick patterns appear, traders should be wary about their long bets.
The following are the several bearish reversal candlestick chart patterns:
14. Hanging man:
This resulted in the formation of a bearish pattern, indicating that sellers have returned to the market and the uptrend may be coming to an end.
If a bearish candle forms the next day, traders can enter a short position with a stop-loss near the high of Hanging Man.
An example of a Hanging Man Candlestick Pattern is shown below:
The Hanging Man candlestick Stock Market Chart Patterns, is a single candlestick pattern that appears at the end of an upswing and indicates a bearish reversal.
This candle’s real body is small and positioned at the top, with a lower shadow that should be twice as long as the genuine body. The upper shadow on this candlestick pattern is either absent or minimal.
The psychology behind this candle formation is that prices opened and sellers pushed prices down.
Buyers rushed into the market, hoping to push prices higher, but they were unsuccessful, as prices closed below the opening price.
15. Dark cloud cover:
After an ascent, a numerous candlestick pattern called Dark Cloud Cover appears, signalling a bearish reversal.
It is made up of two candles, the first of which is a bullish candle, indicating that the uptrend will continue.
The second candle is a bearish candle that opens gap up but closes more than half of the preceding candle’s genuine body, indicating that the bears have returned to the market and a bearish reversal is imminent.
If a bearish candle forms the next day, traders can enter a short position with a stop-loss at the high of the second candle.
An example of a Dark Cloud candlestick pattern is shown below:
16. Bearish Engulfing:
Bearish Engulfing is a multiple candlestick pattern that indicates a bearish reversal following an uptrend.
It is made up of two candles, with the second candlestick swallowing the first. The first candle, which is a bullish candle, implies that the upswing will continue.
The second candlestick chart displays a long bearish candle that totally engulfs the first one, indicating that the bears have returned to the market. If a bearish candle forms the next day, traders can enter a short position with a stop-loss at the high of the second candle.
If a bearish candle forms the next day, traders can enter a short position with a stop-loss at the high of the second candle.
17. The Evening Star:
After an uptrend, the Evening Star is a multiple candlestick pattern that indicates a bearish reversal.
It is made up of three candlesticks, the first of which is a bullish candle, the second of which is a doji, and the third of which is a bearish candle.
The first candle suggests that the uptrend is continuing, the second candle is a doji, indicating market indecision, and the third bearish candle indicates that the bears have returned to the market and a reversal is imminent.
If a bearish candle forms the next day, traders can open a long position with a stop-loss at the peak of the second candle.
The second candle should be fully separate from the first and third candles’ true bodies.
18. Three Black Crows:
After an uptrend, the Three Black Crows is a multiple candlestick pattern that indicates a bearish reversal.
Three long bearish bodies with no long shadows open within the true body of the previous candle in the pattern make up these candlesticks.
19. Black Marubozu:
After an uptrend, the Black Marubozu is a single candlestick pattern that indicates a bearish reversal.
This candlestick chart displays a long bearish body with no upper or lower shadows, indicating that the bears are applying selling pressure and that the markets are likely to turn bearish.
Buyers should use cautious and close their positions when this candle forms.
20. Three Inside Down:
After an uptrend, the Three Inside Down is a multiple candlestick pattern that indicates a bearish reversal.
It is made up of three candlesticks, the first of which is a long bullish candle and the second of which is a little bearish candle that should be in the same range as the first.
After this candlestick pattern is completed, traders can take a short position.
A long bearish candlestick should appear on the third candlestick chart, confirming the bearish reversal.
The first and second candlesticks should have a bearish Harami candlestick Stock Market Chart Patterns,
relationship.
21. Bearish Harami:
Bearish Harami is a multi-candlestick Stock Market Chart Patterns that appears after an upswing and signals a bearish reversal.
It is made up of two candlesticks, the first of which is a tall bullish candle and the second of which is a little bearish candle that should be inside the first candlestick chart’s range.
After this candlestick pattern is completed, traders can take a short position.
The first bullish candle indicates that the bullish trend is continuing, while the second candle indicates that the bears have returned to the market.
22. Shooting Star:
At the end of an upswing, a Shooting Star forms, signalling a bearish reversal.
The real body is at the end of this candlestick chart, and there is a long upper shadow. The Hanging Man Candlestick pattern is the flipside of this one.
When the starting and closing prices are close to each other, this pattern is generated, and the upper shadow should be more than double the size of the real body.
23. Tweezer Top:
A bearish reversal candlestick pattern generated towards the end of an upswing is known as the Tweezer Top.
It is made up of two candlesticks, the first of which is bullish and the second of which is bearish. Both tweezer candlesticks reach nearly identical highs.
The prior trend is an uptrend when the Tweezer Top candlestick pattern is produced. A bullish candlestick appears, indicating that the current upswing will continue.
The high of the second day’s bearish candle’s high suggests a resistance level the next day. Bulls appear to be raising the price, but they are no longer prepared to buy at greater prices.
The top-most candles with nearly identical highs highlight the resistance’s strength and also indicate that the uptrend may be reversing to establish a downtrend. The next day, when the bearish candle is formed, this bearish reversal is confirmed.
24. Three Outside Down:
After an uptrend, the Three Outside Down is a multiple candlestick pattern that indicates a bearish reversal.
It is made up of three candlesticks, the first of which is a short bullish candle and the second of which is a massive bearish candle that should cover the first.
A long bearish candlestick confirming the bearish reversal should be the third candlestick.
The first and second candlesticks should have a Bearish Engulfing candlestick pattern relationship.
After this candlestick pattern is completed, traders can take a short position.
25. Bearish Counterattack–
The bearish counterattack candlestick pattern comes during an uptrend in the market and is a negative reversal pattern. It indicates that the present market uptrend will cease and that a new slump will take over.
Continuation Candlestick Patterns:
26. Doji:
The Doji pattern is an indecisive candlestick pattern generated when the starting and closing prices are nearly identical.
It forms when bulls and bears compete for price control but neither one succeeds in taking complete control of the market.
With a little actual body and extended shadows, the candlestick design resembles a cross.
27. Spinning Top:
The spinning top candlestick pattern is similar to the Doji, which indicates market hesitation.
The sole difference between a spinning top and a doji is that the spinning top’s true body is larger than a doji’s.
28. Falling Three Methods:
The “falling three techniques” is a bearish five-candle continuation pattern that implies a break in the downtrend but not a reversal.
The candlestick pattern is made up of three shorter counter-trend candlesticks in the middle and two lengthy candlestick charts in the direction of the trend, i.e. downtrend at the beginning and conclusion.
The candlestick pattern is significant because it indicates to traders that the bulls lack the necessary capacity to reverse the trend.
29. Rising Three Methods:
The “rising three techniques” is a bullish five-candle continuation pattern that implies a break in the current uptrend but not a reversal.
Two long candlesticks in the direction of the trend, in this example upwards, make up the candlestick pattern. three shorter counter-trend candlesticks in the centre, and three longer trend candlesticks at the start and end.
The candlestick pattern is significant because it indicates to traders that the bears still lack the ability to reverse the trend.
30. Upside Tasuki Gap:
The “rising three techniques” is a bullish five-candle continuation pattern that implies a break in the current uptrend but not a reversal.
Two long candlesticks in the direction of the trend, in this example upwards, make up the candlestick pattern. three shorter counter-trend candlesticks in the centre, and three longer trend candlesticks at the start and end.
The candlestick pattern is significant because it indicates to traders that the bears still lack the ability to reverse the trend.
31. Downside Tasuki Gap:
It’s a bearish continuation candlestick pattern that appears in a decline.
This candlestick pattern is made up of three candles: the first is a long-bodied bearish candlestick, and the second is a bearish candlestick that formed after a gap down.
The third candlestick is a bullish candle that closes the gap left by the previous two bearish candles.
A mat hold pattern is a candlestick shape that indicates that a previous trend will continue.
Mat hold patterns can be either bearish or bullish. A bullish pattern consists of a large bullish candle, a gap higher, and three smaller candles that move lower.
These candles must stay above the first candle’s low point. The fifth candle is a huge candle that is moving upwards once more. The pattern appears as part of a larger upward trend.
33. Rising Window-
A rising window is a candlestick pattern made up of two bullish candlesticks separated by a gap. Due to significant trading volatility, the gap is a distance between the high and low of two candlesticks. It’s a trend continuation candlestick pattern that indicates the market’s strong purchasing power.
34. Falling Window-
The falling window is a candlestick pattern in which two bearish candlesticks are separated by a gap. The gap is the distance between two candlesticks’ high and low points. It happens as a result of extreme trade volatility. It’s a trend continuation candlestick pattern that indicates the market’s strong sellers.
35. High Wave-
The high wave candlestick pattern is an indecisive pattern that indicates neither bullish nor bearish market conditions. It generally happens at the levels of support and resistance. This is where bears and bulls compete to drive the price in a specific direction. Long lower shadows and long higher wicks are used to show the design on candlesticks. They, too, have little bodies. Long wicks indicate that there was a lot of price movement throughout the time period. However, the price eventually settled near the opening level.
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