The candlestick techniques we use today originated in the style of technical charting used by the Japanese for over 100 years before the West developed the bar and point-and-figure analysis systems. In the 1700s a Japanese man named Homma, a trader in the futures market, discovered that, although there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of the traders. He understood that when emotions played into the equation a vast difference between the value and the price of rice occurred. This difference between the value and the price is as applicable to stocks today as it was to rice in Japan centuries ago. The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions towards a stock.
Advance Block
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This pattern consists of a series of three white candlesticks which show a weakening uptrend, and diminishing buying power. Each close is progressively higher while either the candlesticks’ real body size decreases or the top shadows get longer.
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Abandoned Baby Bearish
This pattern consists of three candlesticks. The middle candlestick is a Doji which gaps up from both the first and third candlestick. It is a signal that a top has formed and a trend reversal may be at hand. The pattern is confirmed with the third candle.
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Abandoned Baby Bullish
This pattern consists of three candlesticks. The middle candlestick is a Doji which gaps down from both the first and third candlestick. It is a signal that a bottom has formed and a trend reversal may be at hand. The pattern is confirmed with the third candle.
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Belt Hold Line Bearish
This is a long black candlestick that opens at its high. In an uptrend this would be considered a bearish indicator. This pattern is also called a black opening shaven head.
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Belt Hold Line Bullish
This is a long white candlestick that opens at its low. In a downtrend this would be considered a bullish indicator.
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Body Gap Down
In Japanese Candlestick terms, a body gap down occurs when the real body of the current candlestick gaps down from the previous real body. The highs and lows of the bar are not important, only the body itself. This differs from a western gap down.
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Body Gap Up
In Japanese Candlestick terms, a body gap up occurs when the real body of the current candlestick gaps up from the previous real body. The highs and lows of the bar are not important, only the body itself. This differs from a western gap up.
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Body Midpoint
The Body Midpoint of a candlestick is the midpoint of the real body, that is, halfway between the open and the close.
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Breakaway Bear
The first day is a long white day. The second, third and fourth days all continue in the same direction although day 3 may be a black day, yet will still have a higher open than day 2. Days 2 and 4 must be white. The fifth day is a long black day that closes into the body of the first or second days.
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Breakaway Bull
The first day is a long black day continuing an established down trend. The second candle should preferably perform a negative gap and develop into a negative candle. The third and fourth candles should be bearish and continue in the same direction with lower closes, but more weakly than the first bearish push. It’s acceptable if the third candle is bullish as long as the open is lower than the open of the second candle. The fifth day is a long white day that closes into the body of the first or second days.
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Candlestick Color
The candlestick color attribute for a particular bar – Black/White (Red/Green), or None (Open = Close)
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Candlestick Bottom Shadow Size
The candlestick bottom shadow size attribute for a particular bar. Values are Small, Medium, and Large.
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Candlestick Top Shadow Size
The candlestick top shadow size attribute for a particular bar. Values are Small, Medium, and Large.
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Candlestick Shape
The candlestick shape attribute for a particular bar. Values are Large, Small or Doji.
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Closing Point Reversal Formation
Up Trend: (top)
In an uptrend, the candle opens near its high and closes near its low and below the previous close. This is a bearish reversal
Down Trend: (bottom)
In a down trend, the candle opens near its low and closes near its high and above the previous close. This is a bullish reversal.
The graph below shows a downtrend CPR.
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Closing Marubozu Patterns (white or green – Bullish) | (black or red – Bearish)
A Marubozu candlestick is a full body either bullish or bearish candlestick. In case of a Closing White Marubozu: the Candle is long and white; it has only the Lower Shadow. In case of a Closing Black Marubozu: the Candle is long and black; it has only the Upper Shadow.
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Concealing Baby Swallow
The concealing baby swallow is a 4-candle reversal pattern.
It occurs during bearish trends and it implies the beginning of a bullish move.
The concealing baby swallow has the following structure:
A bearish Marubozu.
Another bearish Marubozu.
A gapping down bearish candle.
Another bearish candle that engulfs the gap down candle.
A valid concealing baby swallow patterns often lead to sharp bullish runs on the chart.
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Counter Attack Line Bearish
This pattern consists of two candlesticks. In an uptrend, the first candlestick is white, the second black. The second candlestick opens sharply higher but closes unchanged from the prior session. When this occurs, it indicates that buyers and sellers are at a standoff.
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Counter Attack Line Bullish
This pattern consists of two candlesticks. The first candlestick is black, the second white. The second candlestick opens sharply lower but closes unchanged from the prior session. When this occurs, it indicates that buyers and sellers are at a standoff.
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Dark Cloud Cover
This pattern consists of two candlesticks. The first candlestick is long and white the second is long and black. The black candlestick opens above the high of the white candlestick but then closes below the midpoint of the white candlestick’s real body. When this pattern occurs in an uptrend it is a bearish sign indicating a reversal may be ready to take place.
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Deliberation Bear
A long white day is followed by a second long white day that closes higher than the first. The third white day gaps above the second and has shorter body than two previous candles. The first two white days say “full speed ahead” as the stock appears strong and in a solid uptrend. The gap up and failure to rally much suggests that the strength may be waning. This isn’t necessarily bearish, but it’s certainly less bullish, so stops are raised, or profits taken on long positions.
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Deliberation Bull
The bullish deliberation pattern takes place when a clear downtrend is in place. It is comprised of three black candlesticks. The first two candles have long black bodies and close near their lows. The last candle gaps away from the previous close, but the body of the candle is small relative to the previous two candlesticks. This small body is a sign of indecision on the part of traders over the current downtrend, hence the name bullish deliberation pattern. While the bullish deliberation pattern is classified as a bullish reversal signal, it does not have a high probability of calling market bottoms. Traders should however use the bullish deliberation pattern as an early sign to lock in profits and or move up protective stops.
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Doji
A doji is a name for a session in which the candlestick for a security has an open and close that are virtually equal and are often components in patterns. Doji candlesticks look like a cross, inverted cross, the letter “T”, inverted letter “T”, a plus sign or other variations. Alone, doji are neutral patterns that are also featured in a number of important patterns.
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Downside Gap Three Methods
The Downside Gap Three Methods is a bearish continuation pattern with the following characteristics:
The market is in a downtrend.
The first bar is a black candle with a long real body.
The second bar is a black candle with a long real body where the shadows over both candles don’t overlap.
The third bar is a white candle that has an open within the real body of the prior candle and a close within the real body of the first candle.
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Dragonfly Doji
A Dragonfly Doji is a type of candlestick pattern that can signal a potential reversal in price to the upside, depending on past price action. It’s formed when the asset’s high, open, and close prices are the same, or virtually the same. The dragonfly doji occurs in a downtrend.
The Dragonfly Doji pattern doesn’t occur frequently, but when it does it is a warning sign that the trend may change direction.
It is a strong signal so long as the trend requirement is fulfilled. The signal is confirmed by the next candle. The opposite pattern of the dragonfly doji is the gravestone doji.
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Engulfing Line Bearish
This pattern consists of two candlesticks. The first candlestick is white the second is black. The second candlestick’s open is higher than the first but then closes below the first’s open. The real body of the second candlestick engulfs that of the first. This indicates the bulls tried to force the market higher but failed.
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Engulfing Line Bullish
This pattern consists of two candlesticks. The first candlestick is black the second is white. The second candlestick’s open is lower than the first but then closes higher than the first’s open. The real body of the second candlestick engulfs that of the first. This indicates the bears tried to force the market lower but failed.
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Evening Doji Star
This pattern consists of three candlesticks. The first is a long white candlestick, the second is a Doji and the third is a long black candlestick. The Doji gaps above both the white and black candlestick. The black candlestick has a closing price at or below the midpoint of the white candlestick. When this pattern occurs it is a sign of a major top reversal.
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Evening Star
This pattern is similar to the Evening Doji Star except that the middle candlestick is a small real body instead of a Doji. When this pattern occurs it is a sign of a major top reversal.
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Falling Three Method
This pattern consists of five candlesticks. The first candlestick is long and black; it is followed by three small white bodies each of which closes higher than the prior one. All of the small white bodies hold within the range of the first black candlestick. The final candlestick is a long black body that closes at a new low. In a downtrend this a bearish continuation pattern showing that the bulls tried to stop the downtrend but were unsuccessful.
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Gap Formation
The Gap function detects the Gap formation which occurs when adjacent bars do not overlap. A breakaway or breakdown gap is a signal that a new trend upward or downward trend (respectively) may be starting.
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Gravestone Doji
A gravestone doji is a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance in the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer term bearish downtrend. The opposite pattern of the gravestone doji is the dragonfly doji.
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Hammer
The hammer is a candlestick that is made of a small black body with a very long lower shadow. The open is at or near the high. In a downtrend market this is a bottoming signal.
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Hanging Man
The hanging man has a long lower wick and a short body at the top of the candlestick with little or no upper wick. In order for a candle to be a valid hanging man most traders say the lower wick must be two times greater than the size of the body portion of the candle, and the body of the candle must be at the upper end of the trading range. In an uptrend market this indicates a potential market top.
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Harami Black (Bullish Harami)
This pattern consists of two candlesticks. The first is a long black body; the second is a short white body. The white candlestick’s Open-Close range is within the range of the black candlestick. This indicates the current trend is coming to an end. A period of standoff between bulls and bears is taking place.
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Harami White (Bearish Harami)
This pattern consists of two candlesticks. The first is a long white body, the second is a short black body. The black candlestick’s Open-Close range is within the range of the white candlestick. This indicates the current trend is coming to an end a period of standoff between bulls and bears is taking place.
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Harami Cross Black (Bullish Harami Cross)
This pattern is similar to the Black Harami except that the second candlestick is a Doji.
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Harami Cross White (Bearish Harami Cross)
This pattern is similar to the White Harami except that the second candlestick is a Doji.
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High Wave
The high wave candlestick has a very small real body, and it typifies a stock or index plagued by uncertainty. The spinning top has small upper and lower shadows, whereas in the high wave the shadows are longer, revealing more volatility.
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Homing Pigeon
The homing pigeon is a candlestick pattern where one large candle is followed by a smaller candle with a body is located within the range of the larger candle’s body. Both candles in the pattern must be black, or filled, indicating that the closing price was lower than the opening price. The pattern may indicate that there is a weakening of the current downward trend, which increases the likelihood of an upward reversal although the homing pigeon may also signal a bearish continuation.
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Identical Three Crows
The Identical Three Crows is a three-line bearish reversal candlestick pattern. Every candle has approximately the same length and a black body.
First candle: a candle in an uptrend with a black body
Second candle: the opening price at or near the prior close and a black body.
Third candle: the opening price at or near the prior close and a black body.
The Identical Three Crows should be interpreted the same way as the Three Black Crows pattern. You may treat the Identical Three Crows pattern as a specific variant of the Three Black Crows pattern.
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In Neck Line
This candlestick pattern consists of two candles. The first is black and the second is white. The close of the white candlestick is at or slightly above the low of the black one. This pattern appears in downtrends. The white candlestick represents a brief pause where the bulls have stopped the downward trend but once the white candlestick low is broken the downtrend should resume.
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Inside Bar Formation
As the name suggests, an inside bar is engulfed inside of the preceding bar (mother bar). It is a pattern that forms after a large move in the market and represents a period of consolidation.
The inside bar pattern can be a very powerful price action signal if you understand how to trade it properly. Matching lows and highs are acceptable, however the inside bar’s range must not be outside of the mother candle by even 1 point.
Facts about Inside Bar Pattern:
Inside bar pattern within the trading range (or shadow) of the preceding bar.
It is at least a two candlestick formation
Mother candlestick can be either bullish (green/white) or bearish (red/black)
The inside bar chart pattern can be bullish or bearish.
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Inverted Hammer
This candlestick has a very small real body with a very long top shadow. There is little or no bottom shadow. When appearing after a long downtrend this candlestick indicates a possible trend reversal.
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Island Reversal Formation
An island reversal is a price pattern on bar charts or candlestick charts that, on a daily chart, features a grouping of days separated on either side by gaps in the price action. This price pattern suggests that prices may reverse whatever trend they are currently exhibiting, whether from upward to downward or from downward to upward. The island reversal can be a top (bearish) or a bottom (bullish) formation, though tops are far more frequent between the two. The island reversal formation has five characteristics:
— A lengthy trend leading into the pattern.
— An initial price gap.
— A cluster of price periods that tend to trade within a definable range.
— A pattern of increased volume near the gaps and during the island compared to preceding trend.
— A final gap which establishes the island of prices isolated from the preceding trend.
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Key Reversal Formation
A key reversal is a one-day trading pattern that may signal the reversal of a trend. Other frequently-used names for key reversal include “one-day reversal” and “reversal day. Depending on which way the stock is trending, a key reversal day occurs when:
In an uptrend: (Key Reversal Top)
The day must make a new High
The Open must be above yesterday’s Close
The Close must be below yesterday’s Low
In a downtrend: (Key Reversal Bottom)
The day must make a new Low
The Open must be below yesterday’s Close
The Close must be above yesterday’s High
The greater the price range and volume on the day that this occurs, the more reliable the signal will be.
The chart below shows a Key Reversal in a downtrend, which would be a bullish reversal.
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Kicking Up – Bullish
The kicking candlestick pattern is a two candlestick reversal pattern that begins a new trend opposite to the trend previous. A bullish kicking pattern occurs after a downtrend. The first day candlestick is a bearish marabozu candlestick (a bearish candlestick with little to no upper or lower shadow, where the price opens at the high of the day and closes at the low of the day). The second day gaps up massively and opens above the previous day’s opening price. This second day candlestick is a bullish marabozu (a bullish candlestick with little to no upper or lower shadow, where the price opens at the low of the day and closes at the high of the day). There is a gap or, as the Japanese refer to it, a window between day one’s bearish candlestick and day two’s bullish candlestick.
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Kicking Down – Bearish
A bearish kicking pattern occurs after an uptrend and signals a reversal for a new downtrend. The first day candlestick is a bullish marabozu candlestick. The second day gaps down massively and opens below the previous day’s opening price. This second day candlestick is a bearish marabozu. There is a gap between day one’s bullish candlestick and day two’s bearish candlestick.
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Ladder Bottom
Three black days with consecutively lower closes occur. The fourth day is a black day with an upper wick. An Inverted Hammer. The fifth day is a white day that opens above the real body of the prior candle. The first several days establish a consistent downtrend. As time progresses however shorts take the opportunity to par-off their positions and take profit. This is illustrated in the fourth days black Inverted Hammer candle. As prices are bid up, the high is pushed up. In this formation sellers are still able to drive price down to levels nearer the open creating a small body. Up to day-four in the formation this just suggests that sellers are losing firm control of the market. By the fifth day, a bullish rally creates the long white candle. Candlestick analysts would look for buy entry opportunities to come.
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Ladder Top
The Ladder Top candlestick pattern is a 5-bar bearish reversal pattern.
It is the reverse of the Ladder Bottom. You can identify it with the following characteristics:
Three white days with consecutively higher closes occur. The fourth day is a short white day with a long lower wick. The fifth candle must be a long black candle opening below the real body of the fourth candle.
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Long Legged Doji
This candlestick is a Doji with a long upper and lower shadow. It can be a sign of a market reversal.
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Marubozu White and Black
Marubozu candlesticks indicate that a stock traded strongly in one direction throughout the day. It either closed at its low price of the day or highest price of the day.
Typically Marubozu candlesticks have a long real body and no wicks or shadows.
A bullish Marubozu has a long green real body. The bulls were in full control that day. The stock closed higher than it opened. It didn’t have a higher or lower price that formed wicks. These candlesticks are often perceived as very confident, and technical traders look for follow through.
The bearish Marubozu candle has a long red real body. The bears had control and drove price down. It closed lower than it opened. No high or lows formed wicks.
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Matching Low
A matching low is a two-candle bullish reversal pattern that appears on candlestick charts. It occurs after a downtrend and, in theory, signals a potential end to the selling via two long down (black or red) candlesticks with matching closes. It is confirmed by a price move higher following the pattern.
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Mat Hold Pattern
This pattern consists of five candlesticks. The first is a long white real body followed by three small black bodies, and then a small white body. The first black candlestick gaps up from the first white candlestick. The three black bodies each close progressively lower. The last white candlestick gaps up from the black series. The implication is that the trend has not been stalled. The Mat Hold pattern is a stronger continuation pattern than the Rising Three Method.
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Meeting Lines Bear
Day one is long white day. Day two is long black day. Both days close at or near the same price.
After an uptrend, the second days candle open above the previous close. Even though the second day had rallied during off-exchange hours and opened high, a sell-off brings the close near the previous day close. Figuratively meeting the lines of close prices. This typically means the bull trend has been weakened and a reversal is possible.
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Meeting Lines Bull
Meeting Lines Bull is a bullish market reversal pattern indicating the beginning of an uptrend after a downtrend. It is a two candlestick formation. The first day should be noticeable with strong bearish activity resulting in a long bearish candlestick. On second day there should be a bullish candlestick (often it is shorter than first day candlestick) which opens below a significant gap and closes at or around the closing price of first day candle.
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Morning Doji Star
This pattern consists of three candlesticks. A long black body, a doji that gaps down from the black body and finally a long white candlestick which closes above the midpoint of the black candlestick
This pattern is the same as the Morning Star except a Doji appears instead of a small white body. It shows market indecision more clearly than the morning star and is not considered to be as much of a definitive reversal pattern.
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Morning Star
This pattern consists of three candlesticks. A long black body, a small body that gaps down from the black body and finally a long white candlestick which closes above the midpoint of the black candlestick. The pattern appears at the bottom of a downtrend and reveals a slowing down of downward momentum before a large bullish move lays the foundation for a new uptrend.
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On Neck
During a downtrend, the first day we see a long black candle. The second day is a smaller white day, opening below the low of the first day and closing at, or slightly below the body of the first day. Because the On Neck does not trade up to the previous day’s close or into day one’s candle, it serves as a strong bearish continuation signal.
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Outside Bar Formation
An outside bar is a bar whose trading range totally encompasses that of its predecessor. These patterns develop after both down and up trends and represent exhaustion.
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Piercing Line
This pattern consists of two candlesticks. The first is black, the second white. The white candlestick body opens lower than the black body close, but closes above the midpoint of the black body. This is a bullish continuation pattern.
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Rickshaw Man
The rickshaw man is a type of long-legged doji candlestick where the body can be found at or very near the middle of the candle. The candlestick shows the high, low, open, and close prices. The open and close are at or very close to the same price level, creating the doji. The high and low are far apart, creating long shadows on the candlestick. The rickshaw man shows indecision on the part of participants in a market.
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Rising Three Method
This pattern consists of five candlesticks. The first candlestick is long and white; it is followed by three small black bodies each of which closes lower than the prior one. All of the small black bodies hold within the range of the first white candlestick. The final candlestick is a long white body that closes at a new high. In an uptrend this is a bullish continuation pattern showing that the bears tried to stop the uptrend but were unsuccessful.
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Separating Line Bearish
This pattern consists of two candlesticks. A white candlestick is followed by a black candlestick. Both candlesticks have the same open. When this pattern appears in a downtrend it is a signal that the downtrend should continue.
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Separating Line Bullish
This pattern consists of two candlesticks. A black candlestick is followed by a white candlestick. Both candlesticks have the same open. When this pattern appears in an uptrend it is a signal that the uptrend should continue.
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Shooting Star
This candlestick is a small body with a long upper shadow and little or no lower shadow. When this appears in an uptrend it is bearish signal.
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Short Line Black
Short line candles, also known as short candles, are candles on a candlestick chart that have a short real body. This one-bar pattern occurs when there is only a small difference between the opening price and the closing price over a given period. The length of the upper and lower shadows, representing the high and low for the period, do not make a difference in defining a short line candle.
In other words, a short line candle may have a wide or narrow high and low range for the period but will always have a narrow open and close range.
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Short Line White
Short line candles, also known as short candles, are candles on a candlestick chart that have a short real body. This one-bar pattern occurs when there is only a small difference between the opening price and the closing price over a given period. The length of the upper and lower shadows, representing the high and low for the period, do not make a difference in defining a short line candle.
In other words, a short line candle may have a wide or narrow high and low range for the period but will always have a narrow open and close range.
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Side by Side White Gapping Down
This pattern consists of two white candlesticks which are about the same size. The candlesticks both have the same open. If these candlesticks gap lower from a previous candlestick and the market is in a downtrend, this signals that the downtrend will continue.
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Side by Side White Gapping Up
This pattern consists of two white candlesticks which are about the same size. The candlesticks both have the same open. If these candlesticks gap higher from a previous candlestick and the market is in an uptrend, this signals that the uptrend will continue.
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Spinning Top Black
A black spinning top is a candlestick pattern with a short real body and two shadows, one or both of which are medium to long in length. The closing price is below the opening price. The candlestick pattern represents indecision about the future direction of the asset. Neither the buyers nor the sellers could gain the upper hand.
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Spinning Top White
A white spinning top is a candlestick pattern with a short real body and two shadows, one or both of which are medium to long in length. The closing price is above the opening price. The candlestick pattern represents indecision about the future direction of the asset. Neither the buyers nor the sellers could gain the upper hand.
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Stalled Pattern
This pattern consists of two candlesticks. The first is long white candlestick and the second is a small body. The second body is near the top of the long white candlestick body or above it. When this pattern is spotted during an uptrend, it usually signals stalling out of the uptrend.
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Stick Sandwich
A stick sandwich is a technical trading pattern in which three candlesticks form what appears to resemble a sandwich on a trader’s screen. Stick sandwiches will have the middle candlestick oppositely colored of the candlesticks on either side of it, both of which will have a larger trading range than the middle candlestick. Stick sandwich patterns can occur in both bearish and bullish forms. In a bearish stick sandwich, the outside candlesticks will be long green candlesticks, while the inside candlestick will be shorter and red, and will be engulfed by one or both of the outside sticks. A bullish stick sandwich will look the same but with the opposite color and trading patterns as the bearish sandwich.
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Takuri
A small bodied candle with a lower shadow at least three times the height of the body and little or no upper shadow.
The Takuri line candle acts as a bullish reversal.
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Tasuki Downside Gap
This pattern consists of three candlesticks. The first is a black body in a downtrend. The second is a black body with its open below the prior close. The third is a white body with its opening price within the range of the prior black one and its closing price below the close of the first candle. In a declining market this is a bearish continuation pattern.
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Tasuki Upside Gap
This pattern consists of three candlesticks. The first is a long white body in an uptrend. The second is a white body with its open above the prior close. The third is a black body which opens in the range of the prior white one but then closes above the close of the first candle. In an advancing market this is a bullish continuation pattern.
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Three Black Crows
Three black crows indicate a bearish candlestick pattern that predicts the reversal of an uptrend.
The black crow pattern consists of three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle. Often, traders use this indicator in conjunction with other technical indicators or chart patterns as confirmation of a reversal.
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Three Gaps Down
This pattern consists of three candlesticks, each gaps progressively lower. When the pattern appears in a downtrend it is a sign that selling power may be diminishing.
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Three Gaps Up
This pattern consists of three candlesticks, each gaps progressively higher. When pattern appears in an uptrend it is a sign that buying power may be diminishing.
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Three Inside Up
The Three Inside Up pattern is a bullish reversal pattern.
The first candle has a long black body. The second line is any white candle except the doji candles. Additionally the second line body needs to be engulfed by the first line body. The opening price of the second candle may be equal to the first candle’s closing price. The closing price of the second candle may be equal to the opening price of the first candle. These two situations cannot happen at the same time, however. The third candle of the pattern may be formed by any candle having a white body, except the doji candles, closing above the second candle’s closing price.
The Three Inside Up pattern should be confirmed, although it is an extension of the confirmed Bullish Harami pattern. Confirmation can be in the form of breaking the nearest support zone or a trendline.
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Three Inside Down
The Three Inside Down three-line pattern is a bearish reversal pattern.
The first candle has a long white body. The second line is any black candle except the doji candles. Additionally the second candle body needs to be engulfed by the first candle body. The opening price of the second candle may be equal to the first candle’s closing price. The closing price of the second candle may be equal to the opening price of the first candle. These two situations cannot happen at the same time, however.
The third candle of the pattern may be formed by any candle having a black body except the doji candles, closing below the second candle’s closing price. The Three Inside Down pattern should be confirmed. Confirmation can be in the form of breaking the nearest support zone or a trendline.
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Three Line Strike Bear
After an established downtrend three long black days in a row continue this move, each closing lower than the previous day. Day-four is white candle that closes near the open of the first day. So long as the previous downtrend is an established one, candlestick analysts view this formation as a sign that the downtrend may still continue. The first three days serve as a fairly clear bearish move. Up to day-three in fact we have a Three Black Crows formation which is a strong bearish signal.
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Three Line Strike Bull
Three white days occur in a row continuing an established bull trend. Each day should close higher than the previous day. Day-four is black candle that closes near the open of the first day. So long as the previous uptrend is an established one, candlestick analysts view the Three Line Strike formation as a sign that the uptrend may still continue.
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Three White Soldiers
This pattern consists of three white candlesticks. Each of the candlesticks closes progressively higher. In addition, the close of each is near the high. This is a bullish reversal pattern which is more reliable if found at the end of a prolonged downtrend.
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Three Outside Down
After an established uptrend a clear bearish Engulfing pattern occurs (one white candle and a second black candle that drives price below the prior day low and closes near the bottom of the range). The third day is a black day with an even lower close than the second day. In a market characterized by uptrend, day two’s black candle closes completely below day one, engulfing it. The first two days are a classic pattern that suggests a sell-off has taken over the market and is breaking the established trend. This bearish reversal is confirmed by a still lower day on day-three.
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Three Outside Up
After an established downtrend, day one continues the trend with a black candle. Day-two is a long white day that engulfs the body of the first day, closing well above the previous days open. The third day is a white day with an even higher close than the second day. The Bullish Three Outside Up pattern is one of the more clear-cut three-day bullish reversal patterns. The formation reflects buyers overtaking selling strength, and often precedes a continued rally in price. In fact up to day-two we have a bullish Engulfing Pattern, itself a strong two-day reversal pattern.
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Three Stars in the South
After an established downtrend, day one is a long red (black) day with a long lower wick. Day-two is also a red day similar to the first, only with a smaller body and shorter bottom wick. Day-three trades within the second days range and has a small red body with no wick at all (Red [black] Marubozu). The Bullish Three Stars in the South formation suggests weakening in the established downtrend. Although each new day is able to close lower, and despite the fact that sellers are able to drive price down illustrated by the lower wicks, those short positions are not able to get the close price to continue the strong bearish trend. While the pattern predicts a reversal, it may only reflect shorts paring off their position (just a delay or respite in the downtrend). Thus analysts do not usually take the Bullish Three Stars in the South as a strong enough buy signal in itself. Instead analysts use it as an indication to liquidate short positions and watch for buying opportunities. This formation is most significant after a protracted sell-off. This is a very rare pattern.
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Thrusting Line
This pattern consists of two candlesticks. The first one is black and the second is white. The white candlestick closes in the black candlestick’s body. However, the white candlestick closes below the midpoint of the black candlestick. This pattern can be a continuation, neutral, or a reversal.
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Tri Star Bear
After an established up trend, three Dojis (open and close at identical or nearly identical price) occur on three consecutive trading days. After a long up-trending market the appearance of three Dojis suggests a great deal of indecision about the future direction of the market. Such signs of indecision often precede reversals. The first Doji day reveals that the market is indecisive after a long uptrend. The second Doji day further emphasizes market uncertainty, by the third Doji day longs have clearly lost momentum and complete control of the market. Candlestick analysts will look for bearish moves in the following days.
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Tri Star Bull
After an established downtrend. Three Dojis (open and close at identical price or nearly identical price) occur on consecutive trading days. In a long bearish market the strength of trend shows weakness as candle bodies grow progressively smaller, eventually forming three consecutive Dojis. A Doji candle reveals market indecision, since neither buyers nor sellers prove able to move the close price away from the open. This kind of price action is quite common during periods with limited market activity like holidays. However, after a protracted downtrend or during periods of high trading volume a number of Dojis can suggest a reversal in market trend.
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Turn Formation
The Turn formation delineates up and down turns in a line. The default time frame is three trading periods. The graphic below shows a downturn.
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Tweezers Bottom
In an established downtrend, day-one is a black candle with a shaven bottom. The second day is a white hammer or Doji with a long upper shadow. The essential element of this pattern is a series of candles that all share the same low. This could be the two days in the example below, or a number of days that are not consecutive. After a protracted bearish move, this may provide a weak reversal signal but most traders will look for additional confirmation of a reversal.
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Tweezers Top
In an established uptrend day one is a white candle with a shaven bottom. The second day is a black hammer or Doji with a long lower shadow. The essential element of this pattern a series of candles that all share the same high. This could be the two days in the example below, or a number of days that are non-consecutive. After a protracted bullish move this may provide a weak reversal signal, but most traders will look for additional confirmation of a reversal.
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Two Crows
Slightly different than the Upside Gap Two Crows pattern, the Two Crows pattern is a three-line bearish reversal candlestick pattern. The pattern requires confirmation, that is, the following candles should break a trendline or the nearest support area which may be formed by the first candle’s line. If the pattern is not confirmed it may act only as a temporary pause within an uptrend.
Although the pattern name suggest that two candles form it, in fact, it contains three candles.
The first candle of the pattern is a white candle appearing as a long candle in an uptrend.
The second candle may be formed by any black candle except the doji. The body needs to be located above the previous body. The shadows do not need to gap.
The third candle has a black body and opens within the second candle’s body and closes within the first candle’s body. The pattern appears rarely on the candlestick charts.
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Unique Three River (aka Unique Three River Bottom)
First candle: Black candle in a downtrend.
Second candle: Black candle within the prior body. The lower shadow is at least twice as long as the body. The low price is below the prior low price.
Third candle: white candle with a body located below the prior body. The low price above the prior low price.
The Unique Three-River Bottom is a bullish reversal three-line pattern. It’s very specific form causes that it appears extremely rarely on the candlestick charts.
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Upside Gap Three Methods
The Upside Gap Three methods is a bullish continuation pattern with the following characteristics:
The market is in an uptrend.
The first bar is a white candle with a long real body.
The second bar is a white candle with a long real body where the shadows over both candles don’t overlap.
The third bar is a black candle that has an open within the real body of the prior candle and a close within the real body of the first candle.
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Upside Gap Two Crows
This pattern consists of three candlesticks. The first is long and white and must continue the uptrend. The second candle is small and black (or red). The third candle is a black candle that is larger than the middle candle but smaller than the first candle. The second small black body gaps up from the long white candlestick. The third body opens above the second open but then closes below the second’s close. This is a top reversal pattern in advancing markets.
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Western Gap Down
A western gap down occurs when the current high is less than the previous low. This is the traditional definition of a gap down unlike the Japanese definition which only takes into account the body of the candlestick (relationship of open and close) and not the highs and lows. The western gap pattern may also be referred to as a “falling window” pattern.
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Western Gap Up
A Western Gap Up occurs when the current low is greater than the previous high. This is the traditional definition of a gap up, unlike the Japanese definition which only takes into account the body of the candlestick (relationship of open and close) and not the highs and lows. The western gap pattern may also be referred to as a “falling window” pattern.
