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Candlestick Pattern Dictionary

  • Abandoned Baby: Abandoned Baby Candlestick example image from StockCharts.comA rare reversal pattern characterized by a gap followed by a Doji, which is then followed by another gap in the opposite direction. The shadows on the Doji must completely gap below or above the shadows of the first and third day.
  • Dark Cloud Cover: Dark Cloud Cover Candlestick example image from StockCharts.comA bearish reversal pattern that continues the uptrend with a long white body. The next day opens at a new high then closes below the midpoint of the body of the first day.
  • Doji: Doji Candlestick example image from StockCharts.comDoji form when a security’s open and close are virtually equal. The length of the upper and lower shadows can vary, and the resulting candlestick looks like, either, a cross, inverted cross, or plus sign. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level.
  • Downside Tasuki Gap: Downside Tasuki Gap Candlestick example image from StockCharts.comA continuation pattern with a long, black body followed by another black body that has gapped below the first one. The third day is white and opens within the body of the second day, then closes in the gap between the first two days, but does not close the gap. (more…)

Candlesticks: Patterns Signalling Range-Trading

  • Doji
    • Psychological state of uncertainty.
  • Engulfing / Outside bars
    • This pattern must appear after a preceding trend in the price.
    • An outside bar would have taken out the stops of both the bulls and the bears, with no follow-through. Hence both sides become less confident and this leads to range-trading behavior.
  • Hammer bottom
    • After a downtrend, the market opens near to the previous close, drops a lot, before closing the period up towards the level at which it opened.
    • Signals an end of the downtrend where the next period will be characterised by range trading.
  • Shooting star
    • After an uptrend, the market opens near the previous close, rallies a lot, but closes the period down towards the level at which it opened.
    • Signals that that supply and demand have become more balanced, and this balance can mean range trading.
  • Hanging man
    • After an uptrend, market does not rise much but falls a lot, before closing back up near to the level at which it opened.
    • This is bearish, and represents the last buyers getting into the uptrend.