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Candlestick Chart Patterns

The document discusses various candlestick patterns and their meanings. Hollow (white) candlesticks indicate buying pressure while filled (black) candlesticks indicate selling pressure. Long candlesticks represent more intense pressure while short candlesticks show consolidation. Specific patterns like doji, hammers, and hanging men can indicate reversals in trend.

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Pranav Kaushal
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669 views

Candlestick Chart Patterns

The document discusses various candlestick patterns and their meanings. Hollow (white) candlesticks indicate buying pressure while filled (black) candlesticks indicate selling pressure. Long candlesticks represent more intense pressure while short candlesticks show consolidation. Specific patterns like doji, hammers, and hanging men can indicate reversals in trend.

Uploaded by

Pranav Kaushal
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Candlestick Chart Patterns

Candlestick Formation
Hollow and Filled Candlesticks
Hollow (White) candlesticks, where the close is greater than the
open, indicate buying pressure. Filled (Black) candlesticks, where
the close is less than the open, indicate selling pressure.

The hollow or filled portion of the candlestick is called the body


(also referred to as the real body).

The long thin lines above and below the body represent the
high/low range and are called shadows (also referred to as
wicks and tails).

The high is marked by the top of the upper shadow and the low by
the bottom of the lower shadow.
Long Versus Short Candlesticks
Generally speaking, the longer the body is, the more intense
the buying or selling pressure. Conversely, short candlesticks
indicate little price movement and represent consolidation.
Long Candlesticks
Long white candlesticks show strong buying pressure.

While long white candlesticks are generally bullish, much


depends on their position within the broader technical
picture. After extended declines, long white candlesticks can
mark a potential turning point or support level.

Long black candlesticks show strong selling pressure

After a long advance, a long black candlestick can foreshadow


a turning point or mark a future resistance level
Marubozu
A White Marubozu forms when the open equals the low and
the close equals the high.
This indicates that buyers controlled the price action from the
first trade to the last trade.
Black Marubozu form when the open equals the high and the
close equals the low.
This indicates that sellers controlled the price action from the
first trade to the last trade.
Long Versus Short Shadows

Upper shadows represent the session high and lower shadows


the session low.
Candlesticks with short shadows indicate that most of the
trading action was confined near the open and close.
Candlesticks with long shadows show that prices extended
well past the open and close.
Long Versus Short Shadows

Candlesticks with a long upper shadow and short lower shadow


indicate that buyers dominated during the session, and bid prices
higher.
However, sellers later forced prices down from their highs, and the
weak close created a long upper shadow.
Candlesticks with long lower shadows and short upper shadows
indicate that sellers dominated during the session and drove prices
lower.
However, buyers later resurfaced to bid prices higher by the end of
the session and the strong close created a long lower shadow.
A long upper and lower shadow indicates that the both the Bears
and the Bulls had their moments during the game, but neither
could put the other away, resulting in a standoff.
Spinning Tops
Candlesticks with a long upper shadow, long lower shadow and small real
body are called spinning tops.

Spinning tops represent indecision and are signs of reversal in the current
trend

After a long advance or long white candlestick, a spinning top indicates


weakness among the bulls and a potential change or interruption in trend.

After a long decline or long black candlestick, a spinning top indicates


weakness among the bears and a potential change or interruption in
trend.
Doji
Doji 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 a cross, inverted cross or plus sign.
Alone, doji are neutral patterns.
Any bullish or bearish bias is based on preceding price action and future
confirmation.
Doji and Trend
After an advance, or long white candlestick, a doji signals that
the buying pressure is starting to weaken.
After a decline, or long black candlestick, a doji signals that
selling pressure is starting to diminish.
Long-legged Doji
Long-legged doji have long upper and lower shadows that are
almost equal in length. These doji reflect a great amount of
indecision in the market.
Dragonfly and Gravestone Doji
Dragonfly Doji
Dragonfly doji form when the open, high and close are equal
and the low creates a long lower shadow.

The resulting candlestick looks like a T with a long lower


shadow and no upper shadow.

Dragonfly doji indicate that sellers dominated trading and


drove prices lower during the session.

By the end of the session, buyers resurfaced and pushed


prices back to the opening level and the session high.
Gravestone Doji
Gravestone doji form when the open, low and close are equal
and the high creates a long upper shadow.

The resulting candlestick looks like an upside down T with a


long upper shadow and no lower shadow.

Gravestone doji indicate that buyers dominated trading and


drove prices higher during the session.

However, by the end of the session, sellers resurfaced and


pushed prices back to the opening level and the session low.
Reversal Patterns With Long Shadows
There are two pairs of single candlestick reversal patterns made up
of a small real body, one long shadow and one short or non-existent
shadow.

Generally, the long shadow should be at least twice the length of


the real body, which can be either black or white.

The first pair, Hammer and Hanging Man, consists of identical


candlesticks with small bodies and long lower shadows.

The second pair, Shooting Star and Inverted Hammer, also contains
identical candlesticks, except, in this case, they have small bodies
and long upper shadows.
Hammer and Hanging Man
The Hammer and Hanging Man look exactly alike, but have
different implications based on the preceding price action.

Both have small real bodies (black or white), long lower


shadows and short or non-existent upper shadows.
Hammer and Hanging Man
The Hammer is a bullish reversal pattern that forms after a decline.

In addition to a potential trend reversal, hammers can mark bottoms


or support levels

The Hanging Man is a bearish reversal pattern that can also mark a top
or resistance level.
Inverted Hammer and Shooting Star
The Inverted Hammer and Shooting Star look exactly alike, but have
different implications based on previous price action.
Both candlesticks have small real bodies (black or white), long upper
shadows and small or nonexistent lower shadows.
These candlesticks mark potential trend reversals, but require
confirmation before action.
Inverted Hammer and Shooting Star
The Inverted Hammer forms after a decline or downtrend.
Inverted Hammers represent a potential trend reversal or support levels.
The Shooting Star is a bearish reversal pattern that forms after an advance
and in the star position, hence its name. A candlestick that gaps away from
the previous candlestick is said to be in star position
A Shooting Star can mark a potential trend reversal or resistance level.

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