By in technical analysis

Technical Analysis Tutorial: Candlestick Compendium!

This is a quick summary of important candlestick patterns. It’s presumed that you know the basics of candles: if you don’t, see the article links in our Members Area.

Without further ado, let’s begin.

1. Bullish Marabuzo

Number of candles: 1.

Description: long green candle which opens near its low, and closes near its high.

Implications: BULLISH.

2. Bearish Marabuzo

Number of candles: 1.

Description: long red candle which opens near its high, and closes near its close.

Implications: BEARISH.

3. Doji

Number of candles: 1.

Description: candle which closes near where it opened.

Implications: REVERSAL.

4. Shooting Star

Number of candles: 1.

Description: candle which closes near where it opened, at the bottom of the period’s range.

Implications: BEARISH REVERSAL (in an uptrend).

5. Hammer

Number of candles: 1.

Description: candle which closes near where it opened, at the top of the period’s range.

Implications: BULLISH REVERSAL (in a downtrend).

6. Hanging Man

Number of candles: 1.

Description: candle which closes near where it opened, at the top of the period’s range.

Implications: BEARISH REVERSAL (in an uptrend) (only weak effectiveness)

7. Inverted Hammer

Number of candles: 1.

Description: candle which closes near where it opened, at the bottom of the period’s range.

Implications: BULLISH REVERSAL (in a downtrend) (only weak effectiveness)

8. Bullish Engulfing Pattern

Number of candles: 2.

Description: green candle with a lower open and a higher close than the previous candle.

Implications: BULLISH REVERSAL (in a downtrend)

9. Bearish Engulfing Pattern

Number of candles: 2.

Description: red candle with a higher open and a lower close than the previous candle.

Implications: BEARISH REVERSAL (in an uptrend)

10. Harami

Number of candles: 2.

Description: candle with a real body contained within the range of the prior real body (which must have moved in the direction of the prior trend).

Implications: REVERSAL (only weak effectiveness)

11. Dark Cloud Cover

Number of candles: 2.

Description: red candle with a higher open than the previous candle, but a close in the bottom half of that prior candle.

Implications: BEARISH REVERSAL (in an uptrend)

12. Piercing Pattern

Number of candles: 2.

Description: green candle with a lower open than the previous candle, but a close in the top half of that prior candle.

Implications: BULLISH REVERSAL (in a downtrend)

13. Morning Star

Number of candles: 3.

Description: long red candle followed by a small-bodied candle which gaps lower. The third candle closes in the top half of the first candle.

Implications: BULLISH REVERSAL (in a downtrend)

14. Evening Star

Number of candles: 3.

Description: long green candle followed by a small-bodied candle which gaps higher. The third candle closes in the bottom half of the first candle.

Implications: BEARISH REVERSAL (in a downtrend)

Graham Neary MSTA (graham@futurestechs.co.uk)