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Archive for the ‘Candlestick Patterns’ Category

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.

Western Gap Up Candlestick Pattern

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.

Western Gap Down Candlestick Pattern

This pattern consists of three candlesticks. The first is long and white, the second and third are small and black. 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.

Upside Gap Two Crows Candlestick Pattern

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 examples above, 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.

Tweezers Top Candlestick Pattern

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 examples 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.

Tweezers Bottom Candlestick Pattern

After an established downtrend. There dojis (open and close at 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.

Tri Star Bull Candlestick Pattern

After an established bull trend, three dojis (open and close at 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.

Tri Star Bear Candlestick Pattern

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.

Thrusting Line Candlestick Pattern

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.

Three White Soldiers Candlestick Pattern

After an established downtrend, day one is a long red 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 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.

Three Stars in the South Candlestick Pattern