Major candlestick patterns and chart patterns

Bullish Bearish reversal and continuation

candlestick patterns and chart patterns
 What is candlestick and what is shows?

A candlestick is a single bar on a

candlestick price chart. It shows asset’s
opening, closing, high & low prices at a
glance for a particular period of time.

Patterns emerging on candlestick charts

can help traders to predict market
movements.
 Component of a candlestick

A candlestick is made up of two

parts
1) Body : It shows net movement
of price within a given time
2) Wick or shadow: It shows price
rejections from high or low
points
Each part holds a different piece of information.

1. Green body means the market has moved up – the

market is bullish over the period of the candlestick
2. Red body means the market has moved down – the
market is bearish over the period of the candlestick
3. The upper shadow/wick shows the highest price
reached during the period
4. The lower shadow/tail shows the lowest price reached
during the period
.
Candle sentiment as per their shape
Success of candlestick Pattern varies depending on factors, including market
conditions, trading volume, and other technical and fundamental factors.
 How candlesticks are made?
Formation of bullish and bearish candlesticks in a given time frame

Formation of bullish candlesticks Formation of bearish candlesticks

Interpretation candlestick charts

By looking at the different elements outlined above, you can see

at a glance:

1. Which direction the market has moved in

2. Whether the movement was linear – if there is a wick or a tail,
this indicates that the movement was non-linear
3. The opening and closing price
4. The highest and lowest prices within the time
period represented by the candlestick
5. Momentum and rejections
Points to remember interpreting technical chart

1. Any candlestick pattern of chart pattern in ineffective in range bound market

unless breakout occurs with rise in volume. Breakout must be confirmed with
higher high or lower low formation in the chart.
2. Patterns either reversal or continuation, work best in trending market, Reversal
patterns work best at the end of the trend while approaching any supply or
demand zone.
3. While continuation patterns work best in trending market while breaking any
supply or demand zone.
Interpretation of candlestick chart patterns

A single candlestick depicts market sentiment for a fragment of

time, a combination of single, double or multiple candleestic
forms candlestick patterns which predicts market reversals or
continuations. We can divide such patterns into:

1. Bullish (reversal) patterns

2. Bearish (reversal) patterns
3. Bullish continuation patterns
4. Bearish continuation patterns
5. Indecisive patterns
Bullish candlestick patterns

White Marubozu

The White Marubuzu is formed by

one single candle.
Here’s how to identify the White
Marubozu candlestick pattern:
One single bullish candle
The body must be big
The wicks should be small or non-
existent
Bullish candlestick patterns
Hammer

Although there were selling

pressures during the day,
ultimately a strong buying
pressure drove the price back up.
The colour of the body can vary,
but green hammers indicate a
stronger bull market than red
hammers.
Bullish candlestick patterns
Inverse/Inverted hammer

It indicates a buying pressure, followed

by a selling pressure that was not strong
enough to drive the market price down
and buyers are expected to have control
of the market soon.
Bullish candlestick patterns

Bullish engulfing

The bullish engulfing pattern is formed

of two candlesticks. The first candle is a
short red body
that is completely engulfed by a larger
green candle culminating in an obvious
win for buyers.
Bullish candlestick patterns

Piercing line

The piercing line is also a two-stick

pattern, made up of a long red
candle, followed by a long green
candle.
There is usually a significant gap
down between the first candlestick’s
closing price, and the green
candlestick’s opening.
It indicates a strong buying pressure,
as the price is pushed up to or above
the mid-price of the previous day.
Bullish candlestick patterns
Morning star

The morning star candlestick pattern is

considered a sign of hope in a bleak
market downtrend.
It is a three-stick pattern: one short-
bodied candle between a long red and a
long green. Traditionally, the ‘star’ will
have no overlap with the longer bodies,
as the market gaps both on open and
close.
It signals that the selling pressure of the
first day is subsiding, and a bull market is
on the horizon.
Bullish candlestick patterns

Three white soldiers

The three white soldiers pattern occurs

over three days. It consists of consecutive
long green (or white) candles with small
wicks, which open and close progressively
higher than the previous day.
It is a very strong bullish signal that occurs
after a downtrend, and shows a steady
advance of buying pressure.
Bullish candlestick patterns

Three Inside Up

The Three Inside Up candlestick pattern is

formed by three candles.
Here’s how to identify the Three Inside Up
candlestick pattern:
•The first candle must be bearish
•The second candle must be bullish
•The close of the second candle should
ideally be above the 50% level of the body of
the first one
•The third candle should close above the first
one
Bullish candlestick patterns

Bullish Harami

The Bullish Harami candlestick pattern is

formed by two candles.
Here’s how to identify the Bullish Harami
candlestick pattern:
•The first candle must be bearish and have a
big body
•The second candle must be small and bullish
•The second candle is inside the body of the
first candle
Bullish candlestick patterns

Bullish Harami cross

The Bullish Harami cross candlestick

pattern is formed by two candles.
Here’s how to identify the Bullish Harami
candlestick pattern:
•The first candle must be bearish and have a
big body
•The second candle must be small Dozi with
no body
•The second candle is inside the body of the
first candle
Bullish candlestick patterns

Tweezer Bottom

The Tweezer Bottom candlestick pattern is

formed by two candles.
Here’s how to identify the Tweezer Bottom
candlestick pattern:
•The first candle is bearish
•The second candle is bullish
•The lows from both candles should be pretty
much at the same level
Bullish candlestick patterns

Three Outside Up

The Three Outside Up candlestick pattern is

formed by three candles.
Here’s how to identify the Three Outside Up
candlestick pattern:
•The first candle is bearish and small
•The second candle is bullish and engulfs the
first one completely
•The third candle is bullish and closes above
the other ones
Bullish candlestick patterns

Bullish Counterattack Line

The Bullish Counterattack Line candlestick

pattern is formed by two candles.
Here’s how to identify the Bullish
Counterattack candlestick pattern:
•The first candle is bearish and big
•The second candle is bullish and small
There’s a gap between the close of the first
candle and the open of the second candle
They both close at the same level
Bullish candlestick patterns

Dragonfly Doji

The Dragonfly Doji candlestick

pattern is formed by one single candle.
Here’s how to identify the Dragonfly
Doji candlestick pattern:
1. The candle has no body
2. The wick at the bottom must be big
At the top, it should have no wick, or
be very small
Bullish candlestick patterns

Bullish Kicker

Bullish kicker is two candlestick pattern

1. The first candle is a long red or black
candle, which indicates a bearish trend.
2. The second candle, which should appear
immediately after the first candle, is a
long white or green candle that opens
gap up and completely engulfs the first
candle.
Bullish candlestick patterns

Bullish three lines strike

Bullish three line strike pattern is a 4

candlestick pattern, It is bullish reversal
as well as bullish continuation pattern.
Here’s how to identify the bullish three
line candlestick pattern:
1. Three bearish candles in a row
2. One big green candle engulfing all
most all 3 previous bearish candles
Bullish candlestick patterns
Bullish separating lines

Its a two-line bullish continuation pattern.

Opening price of the first candle is equal to
the opening price of the second line, i.e.
candles are separating in opposite directions.
Construction:
First candle
a red candle in an uptrend is formed
appears as a long line
Second candle
Green body where
the opening price is equal to the previous
opening price
Bullish candlestick patterns
Bullish in/on neck lines

Bullish In Neck Line is a

two candlestick continuation pattern that
occurs during a uptrend.
1. The first candlestick is long bodied and
white.
2. The second candlestick gaps higher but
ends up closing below it's open, at
around the level of the top of the prior
candlestick's body.
Bullish candlestick patterns

Bullish Hikkake Pattern

The bullish Hikkake pattern consists of

the harami pattern (inside bar), a fake
move to the downside, and a reversal
move with a breakout above the harami
pattern’s high.
Bearish candlestick patterns

Bearish Hikkake Pattern

The bearish Hikkake pattern consists of

the harami pattern (inside bar), a fake
move to upside, and a reversal move
with a breakout below the harami
pattern’s low.
Bearish candlestick patterns

Hanging man

The hanging man is the bearish equivalent

of a hammer; it has the same shape but
forms at the end of an uptrend.
It indicates that there was a significant sell-
off during the day, but that buyers were
able to push the price up again. The large
sell-off is often seen as an indication that
the bulls are losing control of the market.
Bearish candlestick patterns

Shooting star

The shooting star is the same shape as the

inverted hammer, but is formed in an
uptrend: it has a small lower body, and a
long upper wick.
Usually, the market will gap slightly higher
on opening and rally to an intra-day high
before closing at a price just above the
open – like a star falling to the ground.
Bearish candlestick patterns

Bearish engulfing

A bearish engulfing pattern occurs at the

end of an uptrend. The first candle has a
small green body that is engulfed by a
subsequent long red candle.
It signifies a peak or slowdown of price
movement, and is a sign of an impending
market downturn. The lower the second
candle goes, the more significant the trend
is likely to be.
Bearish candlestick patterns

Evening star

The evening star is a three-candlestick

pattern that is the equivalent of the bullish
morning star. It is formed of a short candle
sandwiched between a long green candle
and a large red candlestick.
It indicates the reversal of an uptrend, and
is particularly strong when the third
candlestick erases the gains of the first
candle.
Bearish candlestick patterns

Three black crows

The three black crows candlestick pattern

comprises of three consecutive long red
candles with short or non-existent wicks.
Each session opens at a similar price to the
previous day, but selling pressures push the
price lower and lower with each close.
Traders interpret this pattern as the start of
a bearish downtrend, as the sellers have
overtaken the buyers during three
successive trading days.
Bearish candlestick patterns

Dark cloud cover

The dark cloud cover candlestick

pattern indicates a bearish reversal.
It comprises two candlesticks: a red
candlestick which opens above the
previous green body, and closes below
its midpoint.
It signals that the bears have taken
over the session, pushing the price
sharply lower. If the wicks of the
candles are short it suggests that the
downtrend was extremely decisive.
Bearish candlestick patterns

Black Marubozu

The Black Marubozu candlestick

pattern is formed by one single
candle.
Here’s how to identify the Black
Marubozu candlestick pattern:
•One single bearish candle
•The body must be big
•The wicks should be small or non-
existent
Bearish candlestick patterns

Bearish Harami cross

The Bearish Harami cross candlestick

pattern is formed by two candles.
Here’s how to identify the Bearish
Harami candlestick pattern:
1. The first candle must be bullish
and have a big body
2. The second candle must be dozi
with no body
3. The second candle is inside the
body of the first candle
Bearish candlestick patterns

Three Inside Down

The Three Inside Down candlestick

pattern is formed by three candles.
Here’s how to identify the Three Inside
Down candlestick pattern:
1. The first candle must be bullish
2. The second candle must be bearish
3. The close of the second candle
should ideally be below the 50%
level of the body of the first one
4. The third candle should close below
the first one
Bearish candlestick patterns

Tweezer Top

The Tweezer Top candlestick

pattern is formed by two candles.
Here’s how to identify the Tweezer
Top candlestick pattern:
1. The first candle is bullish
2. The second candle is bearish
The highs from both candles should
be pretty much at the same level
Bearish candlestick patterns

Three Outside Down

The Three Outside Down candlestick

pattern is formed by three candles.
Here’s how to identify the Three
Outside Down candlestick pattern:
1. The first candle is bullish and small
2. The second candle is bearish and
engulfs the first one completely
3. The third candle is bearish and
closes below the other ones
Bearish candlestick patterns

Bearish Counterattack Line

The Bearish Counterattack Line candlestick

pattern is formed by two candles.
Here’s how to identify the Bearish
Counterattack Line candlestick pattern:
1. The first candle is bullish and big
2. The second candle is bearish and small
There’s a gap between the close of the first
candle and the open of the second
They both close at the same level
Bearish candlestick patterns

Gravestone Doji

The Gravestone Doji candlestick

pattern is formed by one single
candle.
Here’s how to identify the
Gravestone Doji candlestick pattern:
The candle has a small body
The wick at the top must be big
At the bottom, it should have no
wick, or be very small
Continuation candlestick patterns
Doji Spinning top

Rising three methods

Falling three methods
Continuation candlestick patterns Doji

Doji & Spinning tops

A Doji candlestick pattern is distinguished by its

Spinning top
narrow body, in which the open and close are
quite near to one another. It represents
uncertainty among buyers and sellers in the
market.
A Doji in a trend may signal a possible pause or
consolidation, implying that if price action in
the trend is confirmed, the trend may
continue.
 Falling three methods
Continuation candlestick patterns

Rising & Falling Three Methods

Falling Three Methods– Three little bullish

candles, or Dojis, in down trend followed by
a huge bearish candle.
Rising three methods
Rising Three Methods– Three little bearish
candles, or Dojis, in up trend followed by a
huge bullish candle.

It points to a brief period of consolidation

prior to the uptrend resuming.
Continuation candlestick patterns

Up and down Tasuki gaps

The Downside Tasuki Gap

Two consecutive solid big red candles
Between both candles, there’s a gap
Finally, a small green candle will close inside
the gap
The Upside Tasuki Gap
Two consecutive solid big green candles
Between both candles, there’s a gap
Finally, a small red candle will close inside
the gap
Continuation candlestick patterns

Mat-Hold

A long bullish candle initiates the Mat-Hold

pattern, which is a continuation pattern
that develops within an uptrend. It is
followed by a short candle (often a Doji)
that indicates a minor downturn or
consolidation, and then another long bullish
candle that carries on the trend. Based on
this pattern, there is a good chance that the
uptrend will resume after a little break.
Continuation candlestick patterns

High Wave

A small true body (open and close

prices are near to each other) with
extended upper and lower shadows,
signifying strong volatility and
indecisiveness in the market, is the
defining feature of the strong Wave
candlestick pattern.
Chart patterns
1. Chart patterns are patterns made by multiple candlesticks and provide
technical analysts with a visual representation of market psychology and
potential support/resistance levels, allowing traders to identify trends, set
triggers, and define risk/reward ratios for their trades.
2. They fall into two main categories – reversal and continuation.
3. They do not always perform as expected. There is no chart pattern or indicator
that is accurate.
4. They just provide a means of better future analysis of a stock with better
understanding of the current projection about the price. While chart patterns
can be helpful signals, they only show what has happened in the past and do
not guarantee future trends
Chart patterns
There are four key elements that are needed to form the pattern:
Old trend: The old trend is the trend that the instrument price is in as the new pattern
begins to form.
New trend: The new trend is the reversal of the old trend that the instrument’s price
becomes when it exists out of the consolidation zone.
Consolidation zone: The consolidation zone is the constricted area recognised by the
support and resistance levels.
Breakout point: The breakout point is the point at which the instrument’s price breaks
out of the consolidation zone.
Chart patterns
Pennant Bullish & Bearish continuation

The pennant chart pattern is a continuation

pattern. The pennant chart pattern occurs
when there is a sudden pause in the price
movement during a strong uptrend or
downtrend. Two converging trend lines that
resemble a triangle form the pennant chart
pattern.
Chart patterns

Head and shoulders Bullish & Bearish

reversal patterns

The head and shoulders chart pattern is a bearish

reversal pattern that occurs after an uptrend in the
market. While inverted Head and Shoulders chart
pattern is bullish reversal pattern that occurs after
a bearish trend
The head and shoulders chart pattern comprises
three peaks. The middle peak is the highest, and
two lower peaks on either side. The pattern gets
complete when the price breaks below the support
level that connects the two troughs between the
peaks.
Chart patterns

Flag Bullish & Bearish continuation

The flag chart pattern occurs during a

strong uptrend or downtrend in the market.
The flag chart pattern depends on the
flagpole ( sharp price movements ) and flag
( period of consolidation ). The flag pattern
signals that the market is taking a brief
pause before continuing in the same
direction as the previous trend.
Chart patterns
Double top & Double bottom

The double-top chart pattern is a bearish reversal

pattern that occurs after an uptrend in the
market. While double-bottom chart pattern is a
bullish reversal pattern that occurs after a down
trend in the market.
It consists of two peaks that are roughly equal in
height, with a trough in between them. The pattern
gets complete when the price breaks below the
support level established during the trough.
The double-top pattern is a signal that the buying
pressure in the market is weakening and that the
trend will soon reverse.
Advance chart patterns bullish & bearish

Island reversal pattern

bullish & bearish reversal
The island reversal pattern indicates a possible
reversal of a prevailing trend.
The pattern is usually formed after a quick reaction
or rally and is separated from the previous move by
an exhaustion gap, and from the move in the
opposite direction that follows a breakaway gap.
This results in isolated data points that are
separated by gaps, hence the name island pattern.
The exhaustion and breakaway gaps usually occur
at about the same level.
Advance chart patterns bullish & bearish

Checkmate reversal pattern

bullish & bearish reversal

Checkmates occur when price moves in a

narrow trading range preceding a reversal in
direction.
1. In a bullish checkmate at a support level,
price trade in a small range, as you can see
in the image.
2. In a bearish checkmate, an uptrend reaches
to a resistance level that is tested and then
rejected due to consequent pressure from
sellers.
Advance chart patterns bullish & bearish

Fry pan Bottom reversal pattern

Bullish reversal

A frying pan bottom structure is comprised of

several Japanese candlesticks. The first
candlesticks are bullish or bearish with small
bodies. This series of candlesticks should form a
rounded bottom. Then, a last candlestick is
formed with a bullish gap opening. This is the
opposite of a Dumpling top.
Advance chart patterns bullish & bearish

Dumpling Top reversal pattern

bearish reversal

The dumpling top pattern occurs when the price

action forms a rounded top, indicating a gradual
transition from a bullish to a bearish market
sentiment. This pattern starts with a series of
small-bodied candlesticks that signify indecision
in the market, followed by a bearish gap
opening that confirms the reversal.
Advance chart patterns bullish & bearish
Advance chart patterns bullish & bearish

Rounding top and bottom

Rounding bottoms form an inverted 'U' shape

and indicate the end of an uptrend while
rounding tops appear as a clear 'U' formation
and signal the end of a downtrend.
Rounding bottom Pattern
Advance chart patterns bullish & bearish

Cup and handle pattern

The Cup and Handle Pattern is a bullish continuation

pattern that typically forms during a price consolidation
period. It is characterized by a cup-like shape followed
by a minor consolidation, forming a handle. The cup
represents a temporary price decline, followed by a
gradual recovery.
The handle signifies a brief pullback before the price
continues its upward trajectory.
While inverted cup and handle is bearish continuation
pattern
Advance chart patterns bullish & bearish Descending triangle

The triangle patterns

1. Descending triangle : Price converges on a Ascending triangle

horizontal support. When support breaks, price
moves downwards
2. Ascending triangle : Price converges on a
horizontal resistance. When resistance is broken
Symmetrical Triangle
price moves upward
3. Symmetrical Triangle : Price converges
From both sides in shape of a converging
triangle. Once the triangle is broken from any
side, price moves in that direction
Advance chart patterns bullish & bearish

Megaphone patterns

The Megaphone pattern suggests a potential continuation of the

uptrend or down trend after a period of consolidation. The price
oscillates between the diverging trendlines,.
Volume: As the price approaches the upper trendline, the volume
should increase compared to the lower part of the pattern or vice
versa. This signifies long pressure accumulating for a potential
breakout.
Breakout: A bullish or bearish breakout occurs when the price
closes decisively above the upper trendline, or below the lower
trend line. Ideally accompanied by a surge in volume. This
suggests a continuation of the uptrend or down trend with
increased momentum.
Advance chart patterns bullish & bearish

Rising and falling wedge patterns

A wedge on the chart could have continuation or

reversal characteristics depending on the trend
direction and wedge type.
The rising wedge pattern develops when price
records higher tops and even higher bottoms.
Therefore, the wedge is like an ascending corridor
where the walls are narrowing until the lines finally
connect at an apex.
A falling wedge pattern is an exact mirror image of
the rising wedge. As a descending wedge pattern, it
develops on the chart when there are lower
bottoms and even lower tops
Advance chart patterns bullish & bearish

Shushi roll patterns

In this pattern, a market or stock starts with a clear

trend in one direction. Then, suddenly, there is a sharp
reversal, where the trend changes direction. It is like
someone unravels the sushi roll oppositely.
The first candle should have a large body, indicating a
strong trend. The second candle should have a body
that completely engulfs the first candle, signifying a
potential reversal.
On higher timeframes, this pattern could manifest as
just two or three candles, with the latter completely
overshadowing the earlier price action, resulting in an
engulfing candle pattern.
The Quasimodo (QM) pattern

The Quasimodo (QM) pattern is a reversal pattern

that helps traders identify trend reversals and enter
existing trends. It's a type of Head and Shoulders
pattern, but have two difference. On the
quasimodo, second neck should be lower/higher
(lower for the bearish, higher for the bullish) and
quasimodo has no second shoulder.
Some other major reversal patterns
Some other major reversal patterns