15 CANDLESTICK PATTERNS

17 CHART PATTERNS
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1 Introduction 1

2 Candlesticks 2

2.1 Doji 2

2.1.1 Gravestone 3

2.1.2 Long-Legged 4

2.1.3 Dragonfly 5

2.2 Morning Star 6

2.3 Evening Star 7

2.4 Hammer 8

2.5 Inverted Hammer 9

2.6 Hanging Man 10

2.7 Shooting Star 11

2.7.1 Shooting Star vs Inverted Hammer 12

2.8 Bullish Engulfing 13

2.9 Bearish Engulfing 14

2.10 Bullish Harami 15

2.11 Bearish Harami 16

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2.12 The Rising-Three Method 17

2.13 The Falling-Three Method 18

2.14 Tweezer Top 19

2.15 Tweezer Bottom 20

3 Continuation Chart Patterns 21

3.1 Ascending Triangle 21

3.2 Descending Triangle 22

3.3 Symmetric Triangle 23

3.4 Bullish Pole & Flag Pattern 24

3.5 Bearish Pole & Flag Pattern 25

3.6 Pennant 26

3.7 Ascending Channel 27

3.8 Descending Channel 28

3.9 Horizontal Channel 29

3.9.1 Bearish Rectangle 30

3.9.2 Bullish Rectangle 31

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4 Reversal Chart Patterns 32

4.1 Double Top 32

4.2 Double Bottom 33

4.3 Head and Shoulders 34

4.4 Inverse Head and Shoulders 35

Patterns That Indicate

5 36
Both Continuations and Reversals

5.1 Rising Wedge 36

5.2 Falling Wedge 37

5.3 Cup and Handle 38

5.4 Inverse Cup and Handle 39

6 Conclusion 40
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1. INTRODUCTION
Candlesticks show us how the price of an underlying
security moves over time, which means we get
insights into the battle between buyers and sellers.
They tell us the four key components of price
movement; the open, close, high and low of the
price of an asset in a given timeframe.

When reading into candlesticks, the key information

lies in the size and the colour. As a result,
candlesticks can be broadly classified into two
types: bullish and bearish. The second component
of a candlestick, apart from the body, is the wicks
on either side. While the body represents the
opening and closing of a security’s price over a
period, the wicks represent its high and low.
The upper wick, above the body of the candlestick,
represents the highest price the asset reached
during the specified time. The lower wick shows
the lowest price.

Let’s delve deeper into the different types of

candlesticks and candlestick patterns.

High
Close

Open
Low
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2. CANDLESTICKS
DOJI:
A Doji is formed when the opening and closing prices
of the security are nearly the same, resulting in the
body of the candle becoming significantly small.
The formation of a Doji candlestick pattern in
technical analysis reflects market indecision often
indicating a potential trend reversal or significant
price consolidation. Doji in isolation doesn’t give
sufficient information to base a trade.

DOJI

High High

Close Open

Open Close

Low Low
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TYPES OF DOJI:
GRAVESTONE:
This Doji has its body at the bottom of the candle.
It usually points towards a possible forthcoming
bearish reversal.

GRAVESTONE
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LONG-LEGGED:
This Doji candle has a relatively longer lower leg.
Even though it depicts indecisiveness, it could also
signal a potential reversal or a consolidation period
ahead.

LONG-LEGGED
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DRAGONFLY:
In this candle, the body is formed at the top of the
candle. it can tell us that a reversal is around the
corner.

DRAGONFLY
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MORNING STAR:
Morning Star is a three-candlestick pattern, where
the first candle is red, usually towards the end of a
downtrend. The third candle confirms the reversal by
opening higher than the previous candle. The star
here is the middle candle, which can be red or green,
showing indecision in the market. The selling
pressure has diminished and the buyers are
getting stronger.

Entry: Slightly above the high of the third candle

SL: Below the low of the star

MORNING STAR
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EVENING STAR:
Evening Star is also a three-candlestick pattern,
where the first candle is green, usually towards the
end of an uptrend. The third candle confirms the
reversal by opening lower than the previous candle.
The star here is the middle candle, which can be
red or green, showing indecision in the market.
Buying pressure has diminished and the sellers
are getting stronger.

Entry: Slightly below the low of the third candle

SL: Above the high of the star

EVENING STAR
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HAMMER:
Hammer candlesticks have a small body with a long
lower shadow or wick. The formation suggests a
potential trend reversal as buyers regain control
after a period of selling pressure (downtrend),
reflecting a psychological shift towards bullish
sentiment in the market.

Entry: Above the high of the hammer candlestick

SL: Below the low of the candlestick

BULLISH HAMMER

Opening Closing

Wick
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INVERTED HAMMER:
An inverted hammer is an upside-down hammer.
The upper wick is typically almost twice as long as
the body, with little to no lower wick. Inverted
hammers indicate a bullish trend reversal from a
downtrend. What happens is that during the
downtrend, where sellers pose a high threat,
buyers push back.

Entry: Above the high of the candle

SL: Below the low of the candlestick

INVERTED HAMMER

High High

Long Upper
Shadow

Close Open

Open Close

Little or No
Lower Shadow
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HANGING MAN:
A hanging man is a single-candlestick bearish
pattern, with a small body with little to no upper
wick and a lower wick nearly twice as long as the
body. The hanging man is typically found at the end
of an uptrend.

Entry: Below the low of the candlestick

SL: Above the high of the candle

HANGING MAN
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SHOOTING STAR:
This candlestick has a small body at the bottom and
a long upper shadow, resembling the tail of a comet.
A shooting star is a bearish candle with a long upper
shadow little or no lower shadow and a small body.
It usually appears after an uptrend/ price rise.
The upper shadow is usually about twice the size
of the body.

Note: Regardless of whether the candle is green or

red, a shooting star signifies a bearish candle when
in an uptrend.

Entry: Below the low of the candle

SL: Above the high of the candle

SHOOTING STAR

Existing uptrend
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 Shooting Star vs. Inverted Hammer

SHOOTING STAR INVERTED HAMMER

Bearish reversal pattern Potential bullish reversal

Appears at the end of an uptrend Appears at the end of a downtrend

Small real body, with a Small real body, with a

long upper shadow long upper shadow

Sign of potential trend change Sign of potential trend change

to downtrend to uptrend

SHOOTING STAR

INVERTED HAMMER
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BULLISH ENGULFING:
A bullish engulfing candle is formed when a small
bearish candle is followed by a bullish candle that
opens at or lower than the previous candle’s closing.
However, the bullish candle closes at a point higher
than the last candle’s opening, thereby engulfing the
bearish candle. Irrespective of the size of the red
candle, the critical factor here is the size of the green
candle.

Entry: Above the high of the bullish candle

SL: Below the low of the bullish candle

BULLISH ENGULFING
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BEARISH ENGULFING:
A bearish engulfing candle is formed when a small
bullish candle is followed by a bearish candle that
opens at or lower than the bullish candle’s closing.
However, the bearish candle closes at a point
higher than the last candle’s opening and, as a
result, engulfs the bullish candle. Contrary to
the bullish engulfing candle, the critical factor
in this pattern is the size of the red candle.

Entry: Below the low of the bearish engulfing candle

SL: Above the high of the bearish engulfing candle

BEARISH ENGULFING
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BULLISH HARAMI:
A Bullish Harami is a two-candlestick pattern at
the end of a downtrend. The first candle is a long
bearish candle. The second candle is a small bullish
candle that is contained within the body of the first
candle.

Entry: Above the high of the bullish candle

SL: Below the low of the bearish candle

BULLISH HARAMI

Red Green Body

Candle Candle
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BEARISH HARAMI:
This pattern consists of two candlesticks. The first
candlestick is larger and represents the existing
uptrend while the second candlestick gaps down the
mid-range of the previous candle and is smaller and
cosied up within the body of the first one.

This pattern indicates that there is selling pressure

and acts as a warning sign that the bears might be
regaining strength suggesting a potential reversal
in the market, from bullish to bearish.

Entry: Below the low of the bearish candle

SL: Above the high of the bullish candle

BEARISH HARAMI

Green Body Red

Candle Candle
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THE RISING THREE METHOD:
The rising three-method pattern appears during an
upward trend and retraces its steps throughout the
following days. The market is now experiencing a
strong buy-side period, and the pattern indicates
that the trend will probably continue in the near term.

The rising three-method candlestick pattern

consists of five candles. The first and fifth are
usually represented by the colour green. They are
lengthy bullish candlesticks. The second, third and
fourth candlesticks are all red.

Entry: Above the high of the fifth candle

SL: Below the low of the first candle

RISING THREE
METHOD

Has to break the first bearish

candlestick’s opening to be valid
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A FALLING THREE METHOD:
A bearish trend and a falling-three-candlestick
pattern show that the bears are in control.
The pattern is produced when the bulls start to gain
the upper hand but are unable to completely defeat
the bears. First, it halts the downward movement of
the price, as seen by the three brief green candles.
The bears catch up to the bulls because they can't
keep up their speed for very long. By closing below
the level of the first long candle, the long red candle
after the pattern completes it.

Entry: Below the low of the fifth candle

SL: Above the high of the first candle

FALLING THREE
METHOD

Big Red Big Red

Candle Candle

Three Small
Green Candles
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TWEEZER TOP:
This is a bearish reversal candlestick pattern that
usually occurs when an uptrend is ending.
The first candle is bullish and the second candle is
bearish. They both usually have the same highs,
although not necessarily. The body of the second
candle can be pretty much any size but it must make
a high similar to the first candle.

Entry: Below the low of the bearish candle

SL: Above the high of the candles

TWEEZER TOPS

A B C D
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TWEEZER BOTTOM:
This is a bullish reversal candlestick pattern that
usually occurs when a downtrend is dying. The first
candle is a bearish candle followed by a second
bullish candle. The body of the second candle can
be any size but their lows must have similar lows.

Entry: Above the high of the bullish candle

SL: Below the low of candles

TWEEZER BOTTOM
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