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Definition of Stocks Fundamental Analysis Technical Analysis ChartPatterns Market Indicators
Candle Stick Point & Figure Futures Intraday Charts Trading Tips

CANDLE STICKS:

 

Each candlestick represents one period (e.g., day) of data. Figure displays the elements of a candle.

Candlestick charts illustrate changes in the underlying supply/demand lines.

Candlesticks display the relationship between the open, high, low, and closing prices, they cannot be displayed on securities that lack opening prices. The interpretation of candlestick charts is based primarily on patterns. The explanations of most popular patterns are given below.

 

Bullish Patterns

 

Long white (empty) line.

It occurs when prices open near the low and close significantly higher near the maximum.

Hammer.

If it occurs after a significant downtrend, it is bullish. If the line occurs after a significant up-trend, it is called a Hanging Man. A Hammer is identified by a small real body and a long lower shadow. The body can be empty or filled.

Piercing line.

This is a bullish pattern and the opposite of a dark cloud cover. The first line is a long filled line and the second line is a long hollow line. The second line opens lower than the first line's low, but it closes more than halfway above the first line's real body.

Bullish engulfing lines.

This pattern is extremely bullish if it occurs after a significant downtrend (i.e., it acts as a reversal pattern). It occurs when a small bearish (filled-in) line is engulfed by a large bullish (hollow or empty) line.

Morning star.

A bullish pattern. This signifies a potential bottom. The "star" indicates a possible reversal and the bullish (empty) line confirms this. The star can be empty or filled-in.

Bullish doji star.

A "star" indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. One should wait for a confirmation (e.g., as in the morning star) before trading a doji star. The first line can be empty or filled in.


Bearish Patterns

 

Long filled-in line.

A bearish line. It occurs when prices open near the high and close significantly lower near the period's low.

Hanging Man.

These lines are bearish if they occur after a significant uptrend. If this pattern occurs after a significant downtrend, it is called a Hammer. They are identified by small real bodies and a long lower shadow. The bodies can be empty or filled-in.

Dark cloud cover.

This is a bearish pattern. The pattern is more significant if the second line's body is below the center of the previous line's body (as illustrated).

Bearish engulfing lines.

This pattern is strongly bearish if it occurs after a significant up-trend (i.e., it acts as a reversal pattern). It occurs when a small bullish (empty) line is engulfed by a large bearish (filled-in) line.

Evening star.

This is a bearish pattern signifying a potential top. The “Evening star” indicates a possible reversal and the bearish (filled-in) line confirms this. The star can be empty or filled-in.

Doji star.

A star indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. One should wait for a confirmation before trading a doji star.

Shooting star.

This pattern suggests a minor reversal when it appears after a rally. The star's body must appear near the low price and the line should have a long upper shadow.

Long-legged doji.

This line often signifies a turning point. It occurs when the open and close are the same, and the range between the high and low is relatively large.

Dragon-fly doji.

This line also signifies a turning point. It occurs when the open and close are the same, and the low is significantly lower than the open, high, and closing prices.

Gravestone doji.

This line also signifies a turning point. It occurs when the open, close, and low are the same, and the high is significantly higher than the open, low, and closing prices.

Star

It indicates reversal. A star is a line with a small real body that occurs after a line with a much larger real body, where the real bodies do not overlap. The shadows may overlap.

 


Neutral Patterns

 

Spinning tops.

These are neutral lines. They occur when the distance between the high and low, and the distance between the open and close, are relatively small.

Doji.

This line implies indecision. The security opened and closed at the same price. These lines can appear in several different patterns.
Double doji lines (two adjacent doji lines) imply that a forceful move will follow a breakout from the current indecision.

Harami.

This pattern indicates a decrease in momentum. It occurs when a line with a small body falls within the area of a larger body.
In this example, a bullish (empty) line with a long body is followed by a weak bearish (filled-in) line. This implies a decrease in the bullish momentum.

Harami cross

This pattern also indicates a decrease in momentum. The pattern is similar to a harami, except the second line is a doji (signifies indecision).

 

 

 

 


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