Candle analysis

Signal

• Bearish reversal when found in an uptrend.

• Bullish reversal when found in a downtrend.

Prerequisites

• Important to be located within respective trend (see above).

• Second real body (open & close) engulfs prior session’s real body, not necessarily the shadow.

• For bullish engulfing, the second candle must be white, whereas for bearish engulfing, the second candle must be black.

Consequence

• The engulfing indicates a transition of power between buyers and sellers, with the winner overwhelms the previous trend.

Signal

• Bullish reversal when found in a downtrend.

• Bearish reversal when found in an uptrend.

Prerequisites

• They must fit with their distinct trends.

• The second real body is small and is confined within the real body from the previous session.

Consequence

• The dominant force is losing support and may be shifting in the wrong direction. The tendency is reversed when a pregnant or mother candle gives birth to a little candle.

Signal

• Bullish reversal.

Prerequisites

• It must be in a downward trend.

• At the end of a downturn, there is a long bearish candle. The following session begins with a lower opening and subsequently reverses to a higher opening, all within 50% of the previous session’s true body.

Consequence

• The primary driver was the downtrend, which enticed prices to gap lower. However, there is a good reversal before the end of trading, which compensates the recent decrease. Sellers are left with doubts about their position.

Signal

• Bearish reversal.

Prerequisites

• It has to be in an upward trend.

• The end of the uptrend is marked by a long bullish candle. The subsequent session begins higher and eventually lower, with the real body remaining within 50% of the previous session’s.

Consequence

• The primary driver was the uptrend, which enticed prices to gap higher. However, there is a negative reversal before the end of trading, which cancels out the recent advance. Those who have been waiting for a chance to participate can finally do so.

Signal

• A tweezer bottom indicates a bullish reversal in the short term.

• Tweezer tops indicate a bearish reversal in the short term.

Prerequisites

• Two days in a row in which the high and low temperatures are the same. The candle’s colour is unimportant, and the tweezers can be made up of real bodies, shadows, and/or doji. Long first body, little second actual body is ideal.

Consequence

• Two successive highs or lows indicate the presence of support or resistance. In the second session, whatever force the market had in the first session is dissipating. In weekly/monthly charts, this is a particularly prominent pattern.

Signal

• Bullish reversal.

Prerequisites

• Must be located within a downtrend.

• At the end of a downturn, a long bearish candle appears.

• The next session has a limited range and likely to be lower. The next candle is a bullish long candle that rallies more than 50% of the previous bearish candle.

Consequence

• The main motivator was the downward trend, which encouraged prices to drop. The brief session that follows, on the other hand, foreshadows a potential shift in opinion. In astrology, Mercury, the Morning Star Planet, appears before sunrise. Finally, the third session confirms the results of the prior two sessions and raises the bar.

Signal

• When detected in an uptrend, this is a bearish reversal indicator.

Prerequisites

• Must be located within an uptrend.

• At the top of the upswing, there is a long bullish candle. The next session has a small range and has a tendency to gap higher. A bearish long candle follows, followed by a bearish short candle.

Consequence

• The primary driver was the uptrend, which enticed prices to gap higher. The following brief session, on the other hand, foreshadows a possible shift in attitude. The evening star planet “Venus” appears in astrology before nightfall. Finally, the third session verifies the second and drives the price lower.

Signal

• A bearish pattern indicates a reversal to the upward.

Prerequisites

• The first session begins with a long white candle, followed by a gaped-up black body. A third black flame, which engulfs the first day’s body, completes the pattern.

Consequence

• The market is on an uptrend and has recently gapped up to a new all-time high. The market fails to maintain its position and is followed by two dark bodies that grow in length. The sellers gradually gain control. If price does not restore strength in the fourth session, the downside may prevail.

Signal

• After a downtrend or range-bound market, a bullish pattern signals strength.

Prerequisites

• Three consecutive sessions of long white candlesticks, each closing at or near previous high. Each candle begins at or near the range of the body of the previous.

Consequence

• Three long white candlestick sessions in a row, each closing at or around the preceding high. Each candle starts at or near the range of the previous candle’s body.

Signal

• Market correction is indicated by a bearish pattern.

Prerequisites

• Three sessions of extended black candlesticks, each closing lower than the preceding and all at or near lows. Consecutive candles start inside the range of the previous candle’s body.

• Second real body (open & close) engulfs prior session’s real body, not necessarily the shadow.

Consequence

• The Three Black Crows pattern suggests a shift in selling pressure to the downside. The bodies are long and the shadows are little. The pattern is best suited for long-term traders who will wait for all three to complete to confirm a market correction.

Signal

• When tasuki gaps up, bullish continuation is likely.

• When tasuki gaps down, bearish continuation is likely.

Prerequisites

• A bullish tasuki gaps up, then one white and one black candle, preferably of equal size, follows. The second black candle ignites within the physical body and then extinguishes below. A bearish tasuki gap is the polar opposite.

Consequence

• In the third session, the gap does not close completely, indicating that the current trend will continue. If the gap is filled, however, support or resistance has been breached, and the optimistic or bearish mood has been nullified.

Signal

• Pattern of bullish continuance.

Prerequisites

• The first session is usually marked by a long white candlestick, which is followed by an open above the previous candlestick’s closing. The size of the second and third sessions is comparable, and both are white.

• The gap between the first and second sessions is not closed by the end of the third session.

Consequence

• In an upward trend, this pattern is the most important. This pattern indicates a continuance of the bullish bias in an already bullish situation.

Signal

• At the top of a clear uptrend, a bearish reversal signal arises.

Prerequisites

• Three white candlesticks like three white soldiers, except the advancing block is always up trending.

• The second and third sessions have extended upper shadows and open within the body of the previous session.

Consequence

• Each succeeding bull candle is weaker than the preceding, indicating that the previous upswing is losing momentum. The market is attempting unsustainable highs, and the shadows indicate a lack of position strength.

Signal

• In a downturn, a bullish reversal can be seen.

• When observed in an uptrend, this represents a bearish reversal.

Prerequisites

• They must fit with their distinct trends.

• The second session is a doji that gaps in the trend’s direction, followed by a third session that gaps in the opposite direction of the first.

Consequence

• In one final try, trend strength gaps, but a rapid change in momentum pulls price in the opposite direction.

Signal

• When “rising,” continue to be bullish.

• When “falling,” bearish continuation is expected.

Prerequisites

• The first session is in the trend’s direction, followed by a series of 2-3 short-bodied sessions, ideally trading in the opposite direction of the trend, inside the first candle’s high-to-low range. Finally, a long body workout restores the previous trend’s orientation.

Consequence

• Three Method is seen as a break from trading and combat. In Western chart patterns, it’s similar to a flag or pennant configuration. The first and last candlesticks should have the most volume.