All Patterns Finish, Part 7 Guide
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Guide Candles Patterns
Candlestick patterns are usually quite good when trying to finish an analysis as it can help you confirm a trend.
Basic Candles - Three Line Patterns
1- Advance Block
Description:
The Advance Block is classified as a three-line bearish reversal pattern. The first line is a white candle that appears as a long line in an uptrend. It can be any of the following basic candles: White Candle, Long White Candle, Opening White Marubozu, Closing White Marubozu or White Marubozu.
The second line can be made up of any white candle, appearing as a long or short line. It opens within the body of the first candle and closes above it.
The last, third line, is also any white candle that appears as a long or short line. It opens inside the body of the second line and closes above it.
Each subsequent candle body within the Advance Block pattern is shorter than the previous one.
The shadows in the second and third lines should be longer than those in the first line. The pattern indicates that the bulls are weakening. However, three white bodies form a support zone and, to consider the pattern, it is necessary to confirm it. Therefore, after the appearance of the pattern, the market should close below the first line. If this is not the case, the occurrence of the pattern should be treated as false.
The Advance Block is a very rare pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the opening price is within the previous body
• Or the closing price is above the previous closing price
Third candle
• Or white body
• Or the opening price is within the previous body
• Or the closing price is above the previous closing price
Example:
MRK ,14 Dec, 2010. Chart 1d.
2- Three Outside Up
Description:
The Three Outside Up pattern is a three-line pattern that is an extension of the two-line Bullish Engulfing pattern. Morris introduced the pattern and was intended to improve the performance of the two-line pattern. The third candle is bound to behave as a confirmation of the bullish engulfing. As with the Bullish Engulfing, the first black candle is engulfed by the second with a white body.
The first line can appear as a short or long line. It can be any basic black body sail. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be white. It can be one of the following candles: White Candle, Long White Candle, White Marubozu, Opening White Marubozu and Closing White Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a white body and closes above the closing price of the second candle.
In the case of this pattern, the length of the shadows does not matter.
Although the idea behind the Three Outside Up is to confirm the Bullish Engulfing, in our opinion the extended pattern should be confirmed anyway. Confirmation can be in the form of a breakout of the nearest resistance zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle wraps around the body of the previous candle (black)
Third candle
• Or closing price above the previous closing price
• Or white body
Example:
WMT ,22 Aug, 2012. Chart 1d.
3- Three Stars in the South
Description:
The Three Stars in the South are classified as a three-line bullish reversal pattern.
All of its candles are shortening and having black bodies, indicating that bearish momentum is weakening.
The pattern name can be somewhat misleading, as we are not dealing with star-like short candles here. There are also no price differences between the candle lines.
The first line of the pattern appears as a long line that has a long lower shadow that must be longer than the body. This means that the first line can be made up of the Hammer or Takuri Line pattern.
The second candle opens below the previous opening price and closes below the previous closing price. The low price should be higher than the previous low price.
The third line is a marubozu sail that has a black body. The candle fits within the midline. It appears as a short line. This last condition has the greatest impact at very low frequencies, meaning the pattern rarely appears on candlestick charts.
Building:
First candle
• Or a candle in a downtrend
• O black body
• Or long lower shadow
Second candle
• O black body
• Or the opening below the previous opening
• Either the close below or at the previous close
• Or the low above the previous low
Third candle
• Or a marubozu candle with a black body
• Or appears as a short line
• Or a candle is inside the previous candle
Example:
WMB,15 Sep, 1986. Chart 1d.
4- Evening Doji Star
Description:
The Evening Doji Star is a bearish reversal pattern, very similar to the Evening Star. The only difference is that the Evening Doji Star must have a doji candle (except for the four price Doji) on the second line. The doji candle (second line) must not be preceded or followed by a price difference.
If a lower shadow of a doji candle were placed above the first and second shadow lines, we would be dealing with the Bearish Abandoned Baby pattern.
It happens that the first two candles are forming the Bearish Doji Star pattern.
The pattern, like any other candlestick pattern, should be confirmed in the next few candles exiting the support zone or a trend line. If the occurrence is confirmed, then your third line can act as an area of resistance. However, it also happens that the pattern is simply a short pause before further price increases.
Patterns rarely occur on charts.
Building:
First candle
• or a candle in an uptrend
• or white body
Second candle
• Or a doji candle
• Or a doji body on the body of the previous candle
• Or the low price below the high price of the previous candle
Third candle
• O black body
• O body of the candle below the body of the previous candle
• Or the closing price below the midpoint of the body of the first candle
Example:
PG,12 Dec, 2012. Chart 1d.
5- Bearish Abandoned Baby
Description:
The Bearish Abandoned Baby is a three-line bearish reversal candlestick pattern.
Its construction is very similar to that of the Evening Doji Star. The only difference is that in the case of Bearish Abandoned Baby, the doji candle opens on the shadows of the candle lines on either side, which is not the case with the Evening Doji Star.
The doji candle can be of any type except the four price Doji. In other words, it can be any of the following types of doji: Doji, Long Legged Doji, Dragonfly Doji, Tombstone Doji.
The pattern needs to be confirmed, either by breaking the trend line or the nearest support zone.
The Bearish Abandoned Baby pattern appears very rarely in charts, so its practical application is quite low.
Building:
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or a doji candle
• Or the low price above the previous high price
Third candle
• O black body
• Or the high price below the previous low price
Example:
I have no example for this pattern, sorry.
6- Bearish Side-by-Side White Lines
Description:
The side-by-side bearish white line pattern is a three-line pattern that predicts a continuation of the downtrend.
The first line appears as a long line in a downtrend. The second and third lines can be any white candle that appears as a long or short line, but the body cannot be greater than the body of the first line.
The pattern is characterized by a price gap that appears between the first line and two subsequent lines, whose high prices are below the low price of the first line. The last two candles should be a similar size. Also, your opening and closing prices should be similar.
The first two lines of the pattern form the Descending Window pattern. Bulkowski and Morris in their books present examples where price differences are only between bodies. In other words, the upper shadows of the second and third lines can reach above the low price of the first line. However, in our approach we decided to be more strict. The price gap should appear between candles, including shadows, because Shimizu emphasizes that the candles in this pattern must be quite short.
The pattern has a very low frequency.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the high price below the previous low price
Third candle
• Or white body
• Or the high price below the low price of the first line
• Or the size of the candle is similar to the size of the previous candle
Example:
We can find this chart in JDSU Stock, As of January 14, 2008, tradingview sadly does not have this stock.
7-Evening Star
Description:
The Evening Star is a three-line bearish reversal pattern that appears in an uptrend.
The first line is any white candle that appears as a long line in an uptrend: Long White Candle, White Candle, White Marubozu, Opening White Marubozu, Closing White Marubozu.
The second line can be any black or white candle that appears as a short line, except doji candles. The body of the candle must be placed above the previous body, that is, the opening and closing price must be higher than that of the previous candle.
The third line is a black candle that appears as a long line, that is: Long Black Candle, Black Candle, Black Marubozu, Opening Black Marubozu, Closing Black Marubozu. The opening price should be below the body of the previous candle. The candle should close at least halfway across the body of the first line.
The length of the shadows or the lack of it does not matter for any pattern line.
The second line of the evening star can form the shooting star pattern of a candle. The first two lines can form the two-candle shooting star.
The Evening Star should be confirmed in the following candles, breaking the trend line or the closest support zone, which can be formed by the first line of the pattern. If the pattern is confirmed, your third line may turn into a resistance zone. When the pattern is not confirmed, it may simply be a short pause before further market growth.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white or black body
• Or the body of the candle is above the previous body
Third candle
• O black body
• Or the body of the candle is below the previous body
• Or the candle closes at least half the body of the first line
Example:
BAC,14 Apr, 2010. Chart 1d.
8- Three White Soldiers
Description:
The pattern of the Three White Soldiers has had several names historically. The Japanese called it the Three Red Soldiers, because what in the western world is known as a white candle, they actually used the color red. During World War II, some called the pattern the Three Soldiers on the March. Finally, now the pattern is widely known as the Three White Soldiers.
The pattern is classified as a bullish reversal and appears within a downtrend. The three lines can be formed by any candle that has a white body, appearing as long lines. This means that the following candles may appear: Long White Candle, White Candle, White Marubozu, Opening White Marubozu and Closing White Marubozu. Doji candles and spinning tops are not allowed.
The first line forms in a downtrend. The next lines, which is the second and third, open above the opening price of the previous candle and close above the closing price of the previous candle.
In the past, some authors required that the opening price of the second and third lines be at least half the height of the body of the previous candle. Others demanded that the closing prices be near the high of the candle, that is, that the candles have very short shadows. However, candlestick patterns and technical analysis in general are evolving, and the Three White Soldiers can be used as an example of such an evolution.
In fact, three long white candles in a row with a higher subsequent close price indicate that the bulls are in control of the market.
The pattern must be confirmed, but it does not have to occur on the next nearest candle because it becomes a significant upward movement and some market participant may be willing to take the profit. Such behavior may lead to a temporary price drop, but the candles that form the pattern create an area of support that should rescue the market. Then the bulls can regain control.
If the pattern is followed by a candle that closes below the opening price of the first line, it should be seen as a false signal.
Building:
First candle
• Or a candle in a downtrend
• Or white body
Second candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Third candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Example:
HPE ,27 Apr, 2005. Chart 1d.
9- Morning Star
Description:
The Morning Star is a three-line bullish reversal pattern that appears in a downtrend.
The first line is any black candle that appears as a long line in a downtrend: Long Black Candle, Black Candle, Black Marubozu, Opening Black Marubozu, Closing Black Marubozu.
The second line can be any black or white candle that appears as a short line, except doji candles. The body of the candle must be placed below the previous body, that is, the opening and closing price must be lower than those of the previous candle. In other words, there must be a space between the first and the second body.
The third line is a white candle that appears as a long line, that is: Long White Candle, White Candle, White Marubozu, White Marubozu that opens, White Marubozu that closes. The opening price should be above the body of the previous candle. The candle should close to at least half the body of the first line. Some fonts do not require a space between the second and third body.
The length of the shadows or the lack of it does not matter for any pattern line.
It happens that the first two lines can form the inverted hammer candlestick pattern.
The morning star should be confirmed in the following candles, breaking the trend line or the closest resistance zone, which can be formed by the first line of the pattern. If the pattern is confirmed, your third line can become a support zone. When the pattern is not confirmed, it may simply be a short pause before the market continues to decline.
Building:
First candle
• Or a candle in a downtrend
• Or white body
Second candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Third candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Example:
KO ,23 May, 2007. Chart 1d.
10- Three Inside Down
Description:
Gregory Morris introduces the Three Inside Down three-line pattern as an extension of the Bearish Harami pattern.
The first line of it is any candle that has a white body, appearing as a long line, i.e. White Candle, Long White Candle, White Marubozu, Opening White Marubozu, or Closing White Marubozu. The second line is any black candle except doji candles. Also, the body of the second line must be swallowed by the body of the first line.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a black body, except doji candles, which close below the closing price of the second candle.
Shadows don't matter in the case of this pattern.
The first line of the pattern can act as a support area.
The Three Inside Down pattern should be confirmed. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is below the previous closing price
Example:
CVX,01 May, 2012. Chart 1d.
11- Bullish Tri-Star
Description:
The Bullish Tri-Star pattern is a three-line bullish reversal pattern in which all three lines are doji candles (any doji candle except the four-price Doji).
The middle doji (second line) is below the others. Shadows don't matter.
The pattern must be confirmed at the next candles, which is the closest resistance zone or a trend line must be broken. The context of the market, in which the pattern appears, is crucial.
Nison first introduced the Bullish Tri-Star pattern. It appears very rarely on candlestick charts and is therefore not very useful on a daily basis.
Building:
First candle
• Or a doji candle in a downtrend
Second candle
• Or a doji candle
• Or a body under the previous body
Third candle
• Or a doji candle
• Or a body above the previous body
Example:
BAX,04 Mar, 2009. Chart 1d.
After:
12- Upside Gap Three Methods
Description:
The Upside Gap Three Methods is a bullish continuation pattern of three lines that belongs to the family of tasuki patterns. It is a variant of the Upside Tasuki Gap pattern, but the price gap between the two white candles is closed.
Although the price gap between the two white candles is closed, the pattern is classified as bullish continuation. The pattern must be confirmed, that is, the price must move above the closing price of the second line. In other words, the third line that is a black candle must be negated.
Last two lines can form the Bearish Tasuki Line pattern, which is a bearish reversal pattern. If such a situation occurs, then the market context should play the most important factor.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the minimum above the previous maximum (gap)
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price within the body of the first line (closing the gap)
Example:
AXP,13 Apr, 2009. Chart 1d.
After:
13- Bullish Side-by-Side White Lines
Description:
The side-by-side bullish white line pattern is a three-line pattern that predicts a continuation of the uptrend.
The first line appears as a long line in an uptrend. The second and third lines can be any white candle that appears as a long or short line, but the body cannot be longer than the body of the first line.
The pattern is characterized by a price gap that appears between the first line and two subsequent lines, whose low prices are above the high price of the first line. The last two candles should be a similar size. Also, your opening and closing prices should be similar.
The first two lines of the pattern form the Ascending Window pattern. Bulkowski and Morris in their books present examples where price differences are only between bodies. In other words, the lower shadows of the second and third lines can fall below the high price of the first line. However, in our approach we decided to be more strict. The price gap should appear between candles, including shadows, because Shimizu emphasizes that the candles in this pattern must be quite short.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the low price above the previous high price
Third candle
• Or white body
• Or the low price above the high price of the first line
• Or the size of the candle is similar to the size of the previous candle
Example:
I have no example for this pattern.
14- Three Inside Up
Description:
The Three Inside Up pattern was introduced by Gregory Morris as an extension of the Bullish Harami, confirming that pattern.
Your first line is any candle that has a black body, appearing as a long line, that is, a black candle, a long black candle, a black marubozu, a black marubozu that opens, or a black marubozu that closes. The second line is any white candle, except doji candles. Also, the body of the second line must be swallowed by the body of the first line. In other words, the first and second lines of the pattern form the Bullish Harami pattern.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a white body, except doji candles, closing above the closing price of the second candle. This candle is intended to act as a confirmation of the Bullish Harami pattern.
Shadows don't matter in the case of this pattern.
The first line of the pattern can serve as a support area.
The Three Inside Up pattern should be confirmed, although it is an extension of the confirmed Bullish Harami pattern. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is above the previous closing price
Example:
JPM,25 Sep, 2012. Chart 1d.
15- Three Inside Up
Description:
The Three Inside Up pattern was introduced by Gregory Morris as an extension of the Bullish Harami, confirming that pattern.
Your first line is any candle that has a black body, appearing as a long line, that is, a black candle, a long black candle, a black marubozu, a black marubozu that opens, or a black marubozu that closes. The second line is any white candle, except doji candles. Also, the body of the second line must be swallowed by the body of the first line. In other words, the first and second lines of the pattern form the Bullish Harami pattern.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a white body, except doji candles, closing above the closing price of the second candle. This candle is intended to act as a confirmation of the Bullish Harami pattern.
Shadows don't matter in the case of this pattern.
The first line of the pattern can serve as a support area.
The Three Inside Up pattern should be confirmed, although it is an extension of the confirmed Bullish Harami pattern. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is above the previous closing price
Example:
JPM,25 Sep, 2012. Chart 1d.
16- Deliberation
Description:
Deliberation is a three-line bearish reversal candlestick pattern. It is made up of three white chandeliers. The first and second lines of the pattern have long bodies. The third candle has a shorter body than two previous candles. Each subsequent candle opens above the previous opening price. The same applies to closing prices. The third candle appears as a short line and can be one of the following: Short white candle or White spinning top. The opening price of the last candle is slightly lower or higher than the previous closing price.
Shimizu provides a somewhat different characteristic of the deliberation pattern. The first candle is short, the second is long, indicating a significant upward movement (a price gap is visible on the diagram of his book). The third candle is short, indicating that the bulls are tired of trying to raise the price.
Because all the candles in the pattern have white bodies, the pattern acts as a support zone. The pattern is confirmed if the bears manage to move the price below the opening price of the first candle.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the opening price is higher than the previous opening price
• Or the closing price is above the previous closing price
Third candle
• Or white body
• Or the opening price is slightly lower or higher than the previous closing price
• Or the closing price is above the previous closing price
Example:
MCD ,16 Feb, 2007. Chart 1d.
17- Upside Tasuki Gap
Description:
The Upside Tasuki Gap is a three-line bullish continuation pattern that belongs to the family of tasuki patterns.
Your first line appears as a long line in an uptrend, with a white body.
The second line can appear as any white candle, either as a long or a short line. There is a price gap between the first two lines.
The third line can be any black candle (except doji candles) that opens between the previous open and close prices. It closes below the previous opening price, however it does not close the price gap between the first and second lines.
The Upside Tasuki Gap should be confirmed, that is, the candles that follow its appearance should close above the closing price of the second line.
The second and third lines of the pattern can form the bearish Tasuki Line which acts as a bearish reversal pattern. Therefore, considering the market context is very important.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the minimum above the previous maximum (gap)
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price above the close of the first line
Example:
MCD ,20 Oct, 2014. Chart 1d.
18- Collapsing Doji Star
Description:
The collapsed Doji star pattern is a bearish three-line reversal pattern, which appears very rarely. Therefore, the pattern is not very useful.
The first line is a white candle that appears in an uptrend. The next line is a doji candle (except the four price Doji) that opens below the previous candle, including shadows. The last, third line, is a black candle that also opens below previous candles, including shadows.
The pattern should be confirmed on the following candles.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or a doji candle
• Or the high price below the previous low price
Third candle
• O black body
• Or the high price below the previous low price
Example:
IVZ,16 Nov, 2006. Chart 1d.
19- Three Black Crows
Description:
The Black Three Crows is a three-line bearish reversal candlestick pattern.
The first line appears in an uptrend, and two other lines open below the opening price of the previous candle but above the closing price of the previous candle. The opening price of the second or third candle is allowed to be equal to the opening price of the previous candle.
Historically, the pattern had more conditions, for example, that the next candle should open at least half of the previous candle. Another requirement in the past was that the sails had to have very short bottom shadows. Today, most traders reject such restrictions. Three black candles that appear as long lines, each closing at a new low, indicate market sentiment well.
The Three Black Crows often form a hardiness zone. However, it happens that three black candles are not breaking the nearest support zone and the price is moving sideways.
Often the pattern is preceded by reversal patterns, for example, Bullish Engulfing, Evening Star, Northern Doji, and others.
The location of the pattern on the table can be essential. If the first line breaks a trend line, price drops can be deep. Especially when there are no significant support areas nearby.
The Three Black Crows pattern is canceled when it is followed by candles whose closing price is above the opening price of the first line.
Building:
First candle
• Or a candle in an uptrend
• O black body
Second candle
• O black body
• Or the opening price within the previous body
• Or the closing price below the previous closing price
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price below the previous closing price
Example:
VZ,14 Dec, 2009. Chart 1d.
After:
20- Three Black Cross
Description:
Greg Morris proposed the three-line Three Outside Down pattern as an extension of the two-line Bearish Engulfing pattern. The first and second lines of it form the bearish engulfing pattern.
The first line can appear as a short or long line. It can be any basic candle that has a white body. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be black. It can be one of the following candles: Black Candle, Long Black Candle, Black Marubozu, Opening Black Marubozu and Closing Black Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a black body and closes below the closing price of the second candle.
The length of the shadows does not matter for any line.
The Three Outside Down pattern appears in a downtrend that predicts its reversal. Although the third line is a kind of confirmation of the bearish engulfing, it is worth waiting for the confirmation in the later candles. In other words, it is recommended to see if the price breaks out of the nearest resistance zone or a trend line. Depending on the market, if trading volume information is available, it should normally be significantly higher on the third line of the pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle wraps around the body of the previous candle (white)
Third candle
• Or closing price below the previous closing price
• O black body
Example:
INTC,02 May, 2012. Chart 1d.
After:
20- Three Black Cross
Description:
Greg Morris proposed the three-line Three Outside Down pattern as an extension of the two-line Bearish Engulfing pattern. The first and second lines of it form the bearish engulfing pattern.
The first line can appear as a short or long line. It can be any basic candle that has a white body. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be black. It can be one of the following candles: Black Candle, Long Black Candle, Black Marubozu, Opening Black Marubozu and Closing Black Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a black body and closes below the closing price of the second candle.
The length of the shadows does not matter for any line.
The Three Outside Down pattern appears in a downtrend that predicts its reversal. Although the third line is a kind of confirmation of the bearish engulfing, it is worth waiting for the confirmation in the later candles. In other words, it is recommended to see if the price breaks out of the nearest resistance zone or a trend line. Depending on the market, if trading volume information is available, it should normally be significantly higher on the third line of the pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle wraps around the body of the previous candle (white)
Third candle
• Or closing price below the previous closing price
• O black body
Example:
INTC,02 May, 2012. Chart 1d.
After:
Basic Candles - Four Line Patterns/b]
1- Bearish Three-Line Strike
Description:
The three-line bearish exercise is a bearish continuation candlestick pattern.
First three candles have black bodies. They can be made up of any black candle except doji and form lower closes. All of them are located within a downtrend.
The fourth candle has a white body and appears as a long line. It can be one of the following candles: White Candle, Long White Candle, White Marubozu, Opening White Marubozu, Closing White Marubozu. The candle opens below the previous close and closes above the open of the first line. In other words, the body of the fourth candle envelops all the previous candles. The length of the shadows does not matter.
Similar to the bullish counterpart, the three-line bearish strike is a controversial pattern. Its last two lines form the bullish engulfing pattern, which by definition reverses the downtrend. This is in opposition to what the three-line bearish exercise predicts, which is the continuation of the downtrend. Therefore, as usual, every pattern occurrence must be confirmed.
Bulkowski writes that the three-line bearish strike behaves like a bullish reversal, rather than a bearish continuation. Within its classification of candlestick patterns, the pattern is number one. We are against creating such classifications for a few reasons. First, the pattern appears very rarely on the charts, which does not allow for reasonable statistics to be calculated. Second, by testing many patterns, we clearly see that a given pattern can be very profitable on asset A, while it is a business disaster on asset B. Therefore, each pattern must be thoroughly tested under its specific conditions.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• O black body
• Or the opening price is within the previous body
• Or the closing price is below the previous closing price
Third candle
• O black body
• Or the opening price is within the previous body
• Or the closing price is below the previous closing price
Fourth candle
• Or white body
• The body of the candle wraps all the previous black bodies.
Example:
BF.B,29 Aug, 2013. Chart 1d.
2- Bearish Three-Line Strike
Description:
Hiding Baby Swallow is a four line candlestick pattern, appearing so rarely (or not appearing) that traders can ignore it.
Two Black Marubozu candles appearing one after the other is a very rare situation on candlestick charts, limiting the appearance of this pattern. The additional requirement, which is the appearance of the High Wave candle, makes the pattern hardly appear on the charts.
There is a space between the first and second lines. The second and third lines can form the Inverted Hammer pattern, which has the same forecast as the Hidden Swallow, which is a bullish reversal.
Building:
First candle
Or a Black Marubozu candle in a downtrend
Second candle
• Or a black Marubozu candle
• Or the candle opens inside the body of the previous candle
• Or candle closes below the previous closing price
Third candle
• Or a basic High Wave sail with no bottom shadow
• Or the candle opens below the previous close price
• Or the upper shadow enters the body of the previous candle
Fourth candle
• O black body
• Or the body of the candle wraps around the body of the previous candle, including the shadows
Example:
EXPD ,10 Aug, 1990. Chart 1d.
Basic Candles - Five Line Patterns/b]
1- Bearish Breakaway
Description:
The bearish breakout is a five-line bearish reversal pattern introduced by Greg Morris as the counterpart of the bullish breakout.
Similar to the bullish variant, a price gap forms between the first and second lines.
The last fifth line represents a trend break formed by a long black candle. The opening price is lower than the previous closing price, but the candle closes above the closing price of the first line and the gap is not covered. The pattern requires confirmation and one of the following candles should close the price gap.
The bearish breakout appears very rarely on the charts. In 20 years on the S & P500, we found only 23 occurrences.
Building:
First candle
• Or a tall white candle
Second candle
• Or a white candle
• Or the candle opens above the previous closing price (price difference up, shadows may overlap)
Third candle
• Or a white or black candle
• Or candle opens above the previous opening price
Fourth candle
• Or a white candle
• Or candle closes above the previous closing price
Fifth candle
• Or a tall black candle
• Or the candle opens below the previous close price
• Or the candle closes below the opening price of the second line and above the closing price of the first line
• Or the price gap formed between the first and second lines is not closed
Example:
DIS,02 Apr, 1992. Chart 1d.
2- Ladder Bottom
Building:
• The candlestick pattern at the bottom of the ladder is a bullish 5-bar reversal pattern.
• It is formed by following these characteristics:
• The first three long black chandeliers, which resemble the formation of three black ravens, with successive lower openings and closings
• The fourth is also a black candlestick but with a short body and an upper wick.
• The fifth white candle that opens on the body of the fourth candle
Example:
CMA,30 Jul, 2012. Chart 1d.
3- Rising Three Methods & Falling
Building:
• The Rising Three Methods or Falling is a bullish 5-candle continuation candlestick pattern.
• It has a large green candle, 3 small red ones and a large green one that closes over the others. Or Contrary
• The three descending methods are the opposite of the three ascending methods and is a bearish continuation candlestick pattern.
Falling Three Methods
The three descending methods are the opposite of the three ascending methods and can be seen in a downtrend. The first bar in this pattern is dark bearish with a large real body. The next candles are expected to be smaller, bullish, light-colored ascending candles. These bars should not go beyond the maximum or minimum of the first bar. The last candle to complete the pattern must be lower than the close of the previous candle and must close below the close of the first candle.
That chart pattern experiences a price decline, recovers during the corrective phase, and then the decline resumes. The chandelier behaves in theory as it does in real life. It is a bearish continuation 71 percent of the time and a reversal the rest of the time. Unfortunately, with only 64 samples from 4.7 million candle lines studied, quality performance statistics are as rare as the candle itself.
Example:
KSU ,24 Dec, 2001. Chart 1d.
Rising Three Methods
Using three methods is a bullish continuation pattern that forms in an uptrend and the conclusion of which sees a resumption of that trend. This is the opposite of the three-drop method.
The three-method bottom-up pattern is formed when the price of a security meets these characteristics:
The first bar in the pattern is a bullish candle with a large real body within an obvious uptrend.
The next few candles, usually three consecutive small-bodied bearish candles trading above the low and below the high of the first candle.
The final bar is another bullish candle that has a large real body that breaks above the high and closes above the high and close of the first candle, suggesting that the bulls have once again controlled the direction of the value.
The bulls are in full control before pausing a bit to see if there is enough conviction in the trend. The series of small candles that fall between the first and the fifth candle in the ascending three-method pattern is considered a period of consolidation before the uptrend resumes. The decisive bullish candle is proof that the sellers did not have enough conviction to reverse the previous uptrend and that the buyers have regained control of the market. Active traders can apply the pattern as an indication to include in their long positions.
Example:
OMGBTC ,14 Sep, 00:00, 2008. Chart 6h.
4- Bullish Breakaway
Building:
• The breakaway candlestick pattern is a reversible five-bar candlestick pattern.
• It is a counterpart to Bearish breakaway
• The first candle must be long.
• The next three candles must be spinning tops.
• The second candle must also create a space between the first and itself.
• The fifth candle must be a long candle that closes within the body space of the first two candles.
Example:
DISCK ,06 May, 2015. Chart 1d.
5- Ladder Top
Building:
• The Ladder Top candlestick pattern is a 5-bar bearish reversal pattern that appears at the end of an uptrend.
• You can identify it with the following characteristics:
• The first three candles are always white with long real bodies that open and close above the open and close levels of the previous candle.
• The fourth candle should have a short white body with a long lower wick.
• The fifth candle should be a long black candle that opens below the true body of the fourth candle.
• Its opposite is Ladder Bottom.
How to identify the candlestick pattern at the top of the ladder?
The appearance of the candlestick pattern at the top of the ladder is a very rare phenomenon that occurs very rarely. As we already know that it is a bearish reversal pattern, therefore the predominant trend must be an uptrend or an uptrend. There are a few other suggestions that can be used to identify the pattern at the top of the ladder.
The first three candles are always white with long real bodies that open and close above the open and close levels of the previous candle.
The fourth candle should have a short white body with a long lower wick.
The fifth candle should be a long black candle that opens below the true body of the fourth candle.
Example:
DISCK ,05 Dec, 2016. Chart 1d.
6- Mat Hold Bullish & Bearish
Building:
The bullish Mat Hold Japanese candle formation is a highly reliable trend continuation pattern, which occurs in uptrend or downtrend markets and indicates that there is a high probability that the market will continue with the general trend of its trend. real.
Example:
With this we have finished all the relevant patterns in candles, congratulations you have finished everything. You can go easy, there are others but they are not relevant and they are created by other authors. These are the main ones. They work mostly in Forex and in cryptocurrencies from time to time they are useful, this topic is wide, but I like to teach a completely complete guide. This has just started, the next topic will be Heikin Ashi where it will not be as long as this, but I will try to explain ways to use it. Then we will continue with Line, BaseLine, etc.
Thank you very much for supporting.
Candlestick patterns are usually quite good when trying to finish an analysis as it can help you confirm a trend.
Basic Candles - Three Line Patterns
1- Advance Block
Description:
The Advance Block is classified as a three-line bearish reversal pattern. The first line is a white candle that appears as a long line in an uptrend. It can be any of the following basic candles: White Candle, Long White Candle, Opening White Marubozu, Closing White Marubozu or White Marubozu.
The second line can be made up of any white candle, appearing as a long or short line. It opens within the body of the first candle and closes above it.
The last, third line, is also any white candle that appears as a long or short line. It opens inside the body of the second line and closes above it.
Each subsequent candle body within the Advance Block pattern is shorter than the previous one.
The shadows in the second and third lines should be longer than those in the first line. The pattern indicates that the bulls are weakening. However, three white bodies form a support zone and, to consider the pattern, it is necessary to confirm it. Therefore, after the appearance of the pattern, the market should close below the first line. If this is not the case, the occurrence of the pattern should be treated as false.
The Advance Block is a very rare pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the opening price is within the previous body
• Or the closing price is above the previous closing price
Third candle
• Or white body
• Or the opening price is within the previous body
• Or the closing price is above the previous closing price
Example:
MRK ,14 Dec, 2010. Chart 1d.
2- Three Outside Up
Description:
The Three Outside Up pattern is a three-line pattern that is an extension of the two-line Bullish Engulfing pattern. Morris introduced the pattern and was intended to improve the performance of the two-line pattern. The third candle is bound to behave as a confirmation of the bullish engulfing. As with the Bullish Engulfing, the first black candle is engulfed by the second with a white body.
The first line can appear as a short or long line. It can be any basic black body sail. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be white. It can be one of the following candles: White Candle, Long White Candle, White Marubozu, Opening White Marubozu and Closing White Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a white body and closes above the closing price of the second candle.
In the case of this pattern, the length of the shadows does not matter.
Although the idea behind the Three Outside Up is to confirm the Bullish Engulfing, in our opinion the extended pattern should be confirmed anyway. Confirmation can be in the form of a breakout of the nearest resistance zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle wraps around the body of the previous candle (black)
Third candle
• Or closing price above the previous closing price
• Or white body
Example:
WMT ,22 Aug, 2012. Chart 1d.
3- Three Stars in the South
Description:
The Three Stars in the South are classified as a three-line bullish reversal pattern.
All of its candles are shortening and having black bodies, indicating that bearish momentum is weakening.
The pattern name can be somewhat misleading, as we are not dealing with star-like short candles here. There are also no price differences between the candle lines.
The first line of the pattern appears as a long line that has a long lower shadow that must be longer than the body. This means that the first line can be made up of the Hammer or Takuri Line pattern.
The second candle opens below the previous opening price and closes below the previous closing price. The low price should be higher than the previous low price.
The third line is a marubozu sail that has a black body. The candle fits within the midline. It appears as a short line. This last condition has the greatest impact at very low frequencies, meaning the pattern rarely appears on candlestick charts.
Building:
First candle
• Or a candle in a downtrend
• O black body
• Or long lower shadow
Second candle
• O black body
• Or the opening below the previous opening
• Either the close below or at the previous close
• Or the low above the previous low
Third candle
• Or a marubozu candle with a black body
• Or appears as a short line
• Or a candle is inside the previous candle
Example:
WMB,15 Sep, 1986. Chart 1d.
4- Evening Doji Star
Description:
The Evening Doji Star is a bearish reversal pattern, very similar to the Evening Star. The only difference is that the Evening Doji Star must have a doji candle (except for the four price Doji) on the second line. The doji candle (second line) must not be preceded or followed by a price difference.
If a lower shadow of a doji candle were placed above the first and second shadow lines, we would be dealing with the Bearish Abandoned Baby pattern.
It happens that the first two candles are forming the Bearish Doji Star pattern.
The pattern, like any other candlestick pattern, should be confirmed in the next few candles exiting the support zone or a trend line. If the occurrence is confirmed, then your third line can act as an area of resistance. However, it also happens that the pattern is simply a short pause before further price increases.
Patterns rarely occur on charts.
Building:
First candle
• or a candle in an uptrend
• or white body
Second candle
• Or a doji candle
• Or a doji body on the body of the previous candle
• Or the low price below the high price of the previous candle
Third candle
• O black body
• O body of the candle below the body of the previous candle
• Or the closing price below the midpoint of the body of the first candle
Example:
PG,12 Dec, 2012. Chart 1d.
5- Bearish Abandoned Baby
Description:
The Bearish Abandoned Baby is a three-line bearish reversal candlestick pattern.
Its construction is very similar to that of the Evening Doji Star. The only difference is that in the case of Bearish Abandoned Baby, the doji candle opens on the shadows of the candle lines on either side, which is not the case with the Evening Doji Star.
The doji candle can be of any type except the four price Doji. In other words, it can be any of the following types of doji: Doji, Long Legged Doji, Dragonfly Doji, Tombstone Doji.
The pattern needs to be confirmed, either by breaking the trend line or the nearest support zone.
The Bearish Abandoned Baby pattern appears very rarely in charts, so its practical application is quite low.
Building:
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or a doji candle
• Or the low price above the previous high price
Third candle
• O black body
• Or the high price below the previous low price
Example:
I have no example for this pattern, sorry.
6- Bearish Side-by-Side White Lines
Description:
The side-by-side bearish white line pattern is a three-line pattern that predicts a continuation of the downtrend.
The first line appears as a long line in a downtrend. The second and third lines can be any white candle that appears as a long or short line, but the body cannot be greater than the body of the first line.
The pattern is characterized by a price gap that appears between the first line and two subsequent lines, whose high prices are below the low price of the first line. The last two candles should be a similar size. Also, your opening and closing prices should be similar.
The first two lines of the pattern form the Descending Window pattern. Bulkowski and Morris in their books present examples where price differences are only between bodies. In other words, the upper shadows of the second and third lines can reach above the low price of the first line. However, in our approach we decided to be more strict. The price gap should appear between candles, including shadows, because Shimizu emphasizes that the candles in this pattern must be quite short.
The pattern has a very low frequency.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the high price below the previous low price
Third candle
• Or white body
• Or the high price below the low price of the first line
• Or the size of the candle is similar to the size of the previous candle
Example:
We can find this chart in JDSU Stock, As of January 14, 2008, tradingview sadly does not have this stock.
7-Evening Star
Description:
The Evening Star is a three-line bearish reversal pattern that appears in an uptrend.
The first line is any white candle that appears as a long line in an uptrend: Long White Candle, White Candle, White Marubozu, Opening White Marubozu, Closing White Marubozu.
The second line can be any black or white candle that appears as a short line, except doji candles. The body of the candle must be placed above the previous body, that is, the opening and closing price must be higher than that of the previous candle.
The third line is a black candle that appears as a long line, that is: Long Black Candle, Black Candle, Black Marubozu, Opening Black Marubozu, Closing Black Marubozu. The opening price should be below the body of the previous candle. The candle should close at least halfway across the body of the first line.
The length of the shadows or the lack of it does not matter for any pattern line.
The second line of the evening star can form the shooting star pattern of a candle. The first two lines can form the two-candle shooting star.
The Evening Star should be confirmed in the following candles, breaking the trend line or the closest support zone, which can be formed by the first line of the pattern. If the pattern is confirmed, your third line may turn into a resistance zone. When the pattern is not confirmed, it may simply be a short pause before further market growth.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white or black body
• Or the body of the candle is above the previous body
Third candle
• O black body
• Or the body of the candle is below the previous body
• Or the candle closes at least half the body of the first line
Example:
BAC,14 Apr, 2010. Chart 1d.
8- Three White Soldiers
Description:
The pattern of the Three White Soldiers has had several names historically. The Japanese called it the Three Red Soldiers, because what in the western world is known as a white candle, they actually used the color red. During World War II, some called the pattern the Three Soldiers on the March. Finally, now the pattern is widely known as the Three White Soldiers.
The pattern is classified as a bullish reversal and appears within a downtrend. The three lines can be formed by any candle that has a white body, appearing as long lines. This means that the following candles may appear: Long White Candle, White Candle, White Marubozu, Opening White Marubozu and Closing White Marubozu. Doji candles and spinning tops are not allowed.
The first line forms in a downtrend. The next lines, which is the second and third, open above the opening price of the previous candle and close above the closing price of the previous candle.
In the past, some authors required that the opening price of the second and third lines be at least half the height of the body of the previous candle. Others demanded that the closing prices be near the high of the candle, that is, that the candles have very short shadows. However, candlestick patterns and technical analysis in general are evolving, and the Three White Soldiers can be used as an example of such an evolution.
In fact, three long white candles in a row with a higher subsequent close price indicate that the bulls are in control of the market.
The pattern must be confirmed, but it does not have to occur on the next nearest candle because it becomes a significant upward movement and some market participant may be willing to take the profit. Such behavior may lead to a temporary price drop, but the candles that form the pattern create an area of support that should rescue the market. Then the bulls can regain control.
If the pattern is followed by a candle that closes below the opening price of the first line, it should be seen as a false signal.
Building:
First candle
• Or a candle in a downtrend
• Or white body
Second candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Third candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Example:
HPE ,27 Apr, 2005. Chart 1d.
9- Morning Star
Description:
The Morning Star is a three-line bullish reversal pattern that appears in a downtrend.
The first line is any black candle that appears as a long line in a downtrend: Long Black Candle, Black Candle, Black Marubozu, Opening Black Marubozu, Closing Black Marubozu.
The second line can be any black or white candle that appears as a short line, except doji candles. The body of the candle must be placed below the previous body, that is, the opening and closing price must be lower than those of the previous candle. In other words, there must be a space between the first and the second body.
The third line is a white candle that appears as a long line, that is: Long White Candle, White Candle, White Marubozu, White Marubozu that opens, White Marubozu that closes. The opening price should be above the body of the previous candle. The candle should close to at least half the body of the first line. Some fonts do not require a space between the second and third body.
The length of the shadows or the lack of it does not matter for any pattern line.
It happens that the first two lines can form the inverted hammer candlestick pattern.
The morning star should be confirmed in the following candles, breaking the trend line or the closest resistance zone, which can be formed by the first line of the pattern. If the pattern is confirmed, your third line can become a support zone. When the pattern is not confirmed, it may simply be a short pause before the market continues to decline.
Building:
First candle
• Or a candle in a downtrend
• Or white body
Second candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Third candle
• Or white body
• Or the opening price within the previous body
• Or the closing price above the previous closing price
Example:
KO ,23 May, 2007. Chart 1d.
10- Three Inside Down
Description:
Gregory Morris introduces the Three Inside Down three-line pattern as an extension of the Bearish Harami pattern.
The first line of it is any candle that has a white body, appearing as a long line, i.e. White Candle, Long White Candle, White Marubozu, Opening White Marubozu, or Closing White Marubozu. The second line is any black candle except doji candles. Also, the body of the second line must be swallowed by the body of the first line.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a black body, except doji candles, which close below the closing price of the second candle.
Shadows don't matter in the case of this pattern.
The first line of the pattern can act as a support area.
The Three Inside Down pattern should be confirmed. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is below the previous closing price
Example:
CVX,01 May, 2012. Chart 1d.
11- Bullish Tri-Star
Description:
The Bullish Tri-Star pattern is a three-line bullish reversal pattern in which all three lines are doji candles (any doji candle except the four-price Doji).
The middle doji (second line) is below the others. Shadows don't matter.
The pattern must be confirmed at the next candles, which is the closest resistance zone or a trend line must be broken. The context of the market, in which the pattern appears, is crucial.
Nison first introduced the Bullish Tri-Star pattern. It appears very rarely on candlestick charts and is therefore not very useful on a daily basis.
Building:
First candle
• Or a doji candle in a downtrend
Second candle
• Or a doji candle
• Or a body under the previous body
Third candle
• Or a doji candle
• Or a body above the previous body
Example:
BAX,04 Mar, 2009. Chart 1d.
After:
12- Upside Gap Three Methods
Description:
The Upside Gap Three Methods is a bullish continuation pattern of three lines that belongs to the family of tasuki patterns. It is a variant of the Upside Tasuki Gap pattern, but the price gap between the two white candles is closed.
Although the price gap between the two white candles is closed, the pattern is classified as bullish continuation. The pattern must be confirmed, that is, the price must move above the closing price of the second line. In other words, the third line that is a black candle must be negated.
Last two lines can form the Bearish Tasuki Line pattern, which is a bearish reversal pattern. If such a situation occurs, then the market context should play the most important factor.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the minimum above the previous maximum (gap)
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price within the body of the first line (closing the gap)
Example:
AXP,13 Apr, 2009. Chart 1d.
After:
13- Bullish Side-by-Side White Lines
Description:
The side-by-side bullish white line pattern is a three-line pattern that predicts a continuation of the uptrend.
The first line appears as a long line in an uptrend. The second and third lines can be any white candle that appears as a long or short line, but the body cannot be longer than the body of the first line.
The pattern is characterized by a price gap that appears between the first line and two subsequent lines, whose low prices are above the high price of the first line. The last two candles should be a similar size. Also, your opening and closing prices should be similar.
The first two lines of the pattern form the Ascending Window pattern. Bulkowski and Morris in their books present examples where price differences are only between bodies. In other words, the lower shadows of the second and third lines can fall below the high price of the first line. However, in our approach we decided to be more strict. The price gap should appear between candles, including shadows, because Shimizu emphasizes that the candles in this pattern must be quite short.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the low price above the previous high price
Third candle
• Or white body
• Or the low price above the high price of the first line
• Or the size of the candle is similar to the size of the previous candle
Example:
I have no example for this pattern.
14- Three Inside Up
Description:
The Three Inside Up pattern was introduced by Gregory Morris as an extension of the Bullish Harami, confirming that pattern.
Your first line is any candle that has a black body, appearing as a long line, that is, a black candle, a long black candle, a black marubozu, a black marubozu that opens, or a black marubozu that closes. The second line is any white candle, except doji candles. Also, the body of the second line must be swallowed by the body of the first line. In other words, the first and second lines of the pattern form the Bullish Harami pattern.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a white body, except doji candles, closing above the closing price of the second candle. This candle is intended to act as a confirmation of the Bullish Harami pattern.
Shadows don't matter in the case of this pattern.
The first line of the pattern can serve as a support area.
The Three Inside Up pattern should be confirmed, although it is an extension of the confirmed Bullish Harami pattern. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is above the previous closing price
Example:
JPM,25 Sep, 2012. Chart 1d.
15- Three Inside Up
Description:
The Three Inside Up pattern was introduced by Gregory Morris as an extension of the Bullish Harami, confirming that pattern.
Your first line is any candle that has a black body, appearing as a long line, that is, a black candle, a long black candle, a black marubozu, a black marubozu that opens, or a black marubozu that closes. The second line is any white candle, except doji candles. Also, the body of the second line must be swallowed by the body of the first line. In other words, the first and second lines of the pattern form the Bullish Harami pattern.
The opening price of the second line can be equal to the closing price of the first candle. The closing price of the second line can be equal to the opening price of the first candle. However, these two situations cannot occur at the same time.
The third candle in the pattern can be made up of any candle that has a white body, except doji candles, closing above the closing price of the second candle. This candle is intended to act as a confirmation of the Bullish Harami pattern.
Shadows don't matter in the case of this pattern.
The first line of the pattern can serve as a support area.
The Three Inside Up pattern should be confirmed, although it is an extension of the confirmed Bullish Harami pattern. Confirmation can be in the form of breaking out of the nearest support zone or a trend line.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• Or white body
• Or the body of the candle is enveloped by the body of the previous candle
Third candle
• Or the closing price is above the previous closing price
Example:
JPM,25 Sep, 2012. Chart 1d.
16- Deliberation
Description:
Deliberation is a three-line bearish reversal candlestick pattern. It is made up of three white chandeliers. The first and second lines of the pattern have long bodies. The third candle has a shorter body than two previous candles. Each subsequent candle opens above the previous opening price. The same applies to closing prices. The third candle appears as a short line and can be one of the following: Short white candle or White spinning top. The opening price of the last candle is slightly lower or higher than the previous closing price.
Shimizu provides a somewhat different characteristic of the deliberation pattern. The first candle is short, the second is long, indicating a significant upward movement (a price gap is visible on the diagram of his book). The third candle is short, indicating that the bulls are tired of trying to raise the price.
Because all the candles in the pattern have white bodies, the pattern acts as a support zone. The pattern is confirmed if the bears manage to move the price below the opening price of the first candle.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the opening price is higher than the previous opening price
• Or the closing price is above the previous closing price
Third candle
• Or white body
• Or the opening price is slightly lower or higher than the previous closing price
• Or the closing price is above the previous closing price
Example:
MCD ,16 Feb, 2007. Chart 1d.
17- Upside Tasuki Gap
Description:
The Upside Tasuki Gap is a three-line bullish continuation pattern that belongs to the family of tasuki patterns.
Your first line appears as a long line in an uptrend, with a white body.
The second line can appear as any white candle, either as a long or a short line. There is a price gap between the first two lines.
The third line can be any black candle (except doji candles) that opens between the previous open and close prices. It closes below the previous opening price, however it does not close the price gap between the first and second lines.
The Upside Tasuki Gap should be confirmed, that is, the candles that follow its appearance should close above the closing price of the second line.
The second and third lines of the pattern can form the bearish Tasuki Line which acts as a bearish reversal pattern. Therefore, considering the market context is very important.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or white body
• Or the minimum above the previous maximum (gap)
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price above the close of the first line
Example:
MCD ,20 Oct, 2014. Chart 1d.
18- Collapsing Doji Star
Description:
The collapsed Doji star pattern is a bearish three-line reversal pattern, which appears very rarely. Therefore, the pattern is not very useful.
The first line is a white candle that appears in an uptrend. The next line is a doji candle (except the four price Doji) that opens below the previous candle, including shadows. The last, third line, is a black candle that also opens below previous candles, including shadows.
The pattern should be confirmed on the following candles.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• Or a doji candle
• Or the high price below the previous low price
Third candle
• O black body
• Or the high price below the previous low price
Example:
IVZ,16 Nov, 2006. Chart 1d.
19- Three Black Crows
Description:
The Black Three Crows is a three-line bearish reversal candlestick pattern.
The first line appears in an uptrend, and two other lines open below the opening price of the previous candle but above the closing price of the previous candle. The opening price of the second or third candle is allowed to be equal to the opening price of the previous candle.
Historically, the pattern had more conditions, for example, that the next candle should open at least half of the previous candle. Another requirement in the past was that the sails had to have very short bottom shadows. Today, most traders reject such restrictions. Three black candles that appear as long lines, each closing at a new low, indicate market sentiment well.
The Three Black Crows often form a hardiness zone. However, it happens that three black candles are not breaking the nearest support zone and the price is moving sideways.
Often the pattern is preceded by reversal patterns, for example, Bullish Engulfing, Evening Star, Northern Doji, and others.
The location of the pattern on the table can be essential. If the first line breaks a trend line, price drops can be deep. Especially when there are no significant support areas nearby.
The Three Black Crows pattern is canceled when it is followed by candles whose closing price is above the opening price of the first line.
Building:
First candle
• Or a candle in an uptrend
• O black body
Second candle
• O black body
• Or the opening price within the previous body
• Or the closing price below the previous closing price
Third candle
• O black body
• Or the opening price within the previous body
• Or the closing price below the previous closing price
Example:
VZ,14 Dec, 2009. Chart 1d.
After:
20- Three Black Cross
Description:
Greg Morris proposed the three-line Three Outside Down pattern as an extension of the two-line Bearish Engulfing pattern. The first and second lines of it form the bearish engulfing pattern.
The first line can appear as a short or long line. It can be any basic candle that has a white body. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be black. It can be one of the following candles: Black Candle, Long Black Candle, Black Marubozu, Opening Black Marubozu and Closing Black Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a black body and closes below the closing price of the second candle.
The length of the shadows does not matter for any line.
The Three Outside Down pattern appears in a downtrend that predicts its reversal. Although the third line is a kind of confirmation of the bearish engulfing, it is worth waiting for the confirmation in the later candles. In other words, it is recommended to see if the price breaks out of the nearest resistance zone or a trend line. Depending on the market, if trading volume information is available, it should normally be significantly higher on the third line of the pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle wraps around the body of the previous candle (white)
Third candle
• Or closing price below the previous closing price
• O black body
Example:
INTC,02 May, 2012. Chart 1d.
After:
20- Three Black Cross
Description:
Greg Morris proposed the three-line Three Outside Down pattern as an extension of the two-line Bearish Engulfing pattern. The first and second lines of it form the bearish engulfing pattern.
The first line can appear as a short or long line. It can be any basic candle that has a white body. Doji candles are allowed, except for the four price Doji.
The second line should appear as a long line and the candle should be black. It can be one of the following candles: Black Candle, Long Black Candle, Black Marubozu, Opening Black Marubozu and Closing Black Marubozu. Spinning tops and doji candles are not allowed.
The last line of candles can be any basic candle, which has a black body and closes below the closing price of the second candle.
The length of the shadows does not matter for any line.
The Three Outside Down pattern appears in a downtrend that predicts its reversal. Although the third line is a kind of confirmation of the bearish engulfing, it is worth waiting for the confirmation in the later candles. In other words, it is recommended to see if the price breaks out of the nearest resistance zone or a trend line. Depending on the market, if trading volume information is available, it should normally be significantly higher on the third line of the pattern.
Building:
First candle
• Or a candle in an uptrend
• Or white body
Second candle
• O black body
• Or the body of the candle wraps around the body of the previous candle (white)
Third candle
• Or closing price below the previous closing price
• O black body
Example:
INTC,02 May, 2012. Chart 1d.
After:
Basic Candles - Four Line Patterns/b]
1- Bearish Three-Line Strike
Description:
The three-line bearish exercise is a bearish continuation candlestick pattern.
First three candles have black bodies. They can be made up of any black candle except doji and form lower closes. All of them are located within a downtrend.
The fourth candle has a white body and appears as a long line. It can be one of the following candles: White Candle, Long White Candle, White Marubozu, Opening White Marubozu, Closing White Marubozu. The candle opens below the previous close and closes above the open of the first line. In other words, the body of the fourth candle envelops all the previous candles. The length of the shadows does not matter.
Similar to the bullish counterpart, the three-line bearish strike is a controversial pattern. Its last two lines form the bullish engulfing pattern, which by definition reverses the downtrend. This is in opposition to what the three-line bearish exercise predicts, which is the continuation of the downtrend. Therefore, as usual, every pattern occurrence must be confirmed.
Bulkowski writes that the three-line bearish strike behaves like a bullish reversal, rather than a bearish continuation. Within its classification of candlestick patterns, the pattern is number one. We are against creating such classifications for a few reasons. First, the pattern appears very rarely on the charts, which does not allow for reasonable statistics to be calculated. Second, by testing many patterns, we clearly see that a given pattern can be very profitable on asset A, while it is a business disaster on asset B. Therefore, each pattern must be thoroughly tested under its specific conditions.
Building:
First candle
• Or a candle in a downtrend
• O black body
Second candle
• O black body
• Or the opening price is within the previous body
• Or the closing price is below the previous closing price
Third candle
• O black body
• Or the opening price is within the previous body
• Or the closing price is below the previous closing price
Fourth candle
• Or white body
• The body of the candle wraps all the previous black bodies.
Example:
BF.B,29 Aug, 2013. Chart 1d.
2- Bearish Three-Line Strike
Description:
Hiding Baby Swallow is a four line candlestick pattern, appearing so rarely (or not appearing) that traders can ignore it.
Two Black Marubozu candles appearing one after the other is a very rare situation on candlestick charts, limiting the appearance of this pattern. The additional requirement, which is the appearance of the High Wave candle, makes the pattern hardly appear on the charts.
There is a space between the first and second lines. The second and third lines can form the Inverted Hammer pattern, which has the same forecast as the Hidden Swallow, which is a bullish reversal.
Building:
First candle
Or a Black Marubozu candle in a downtrend
Second candle
• Or a black Marubozu candle
• Or the candle opens inside the body of the previous candle
• Or candle closes below the previous closing price
Third candle
• Or a basic High Wave sail with no bottom shadow
• Or the candle opens below the previous close price
• Or the upper shadow enters the body of the previous candle
Fourth candle
• O black body
• Or the body of the candle wraps around the body of the previous candle, including the shadows
Example:
EXPD ,10 Aug, 1990. Chart 1d.
Basic Candles - Five Line Patterns/b]
1- Bearish Breakaway
Description:
The bearish breakout is a five-line bearish reversal pattern introduced by Greg Morris as the counterpart of the bullish breakout.
Similar to the bullish variant, a price gap forms between the first and second lines.
The last fifth line represents a trend break formed by a long black candle. The opening price is lower than the previous closing price, but the candle closes above the closing price of the first line and the gap is not covered. The pattern requires confirmation and one of the following candles should close the price gap.
The bearish breakout appears very rarely on the charts. In 20 years on the S & P500, we found only 23 occurrences.
Building:
First candle
• Or a tall white candle
Second candle
• Or a white candle
• Or the candle opens above the previous closing price (price difference up, shadows may overlap)
Third candle
• Or a white or black candle
• Or candle opens above the previous opening price
Fourth candle
• Or a white candle
• Or candle closes above the previous closing price
Fifth candle
• Or a tall black candle
• Or the candle opens below the previous close price
• Or the candle closes below the opening price of the second line and above the closing price of the first line
• Or the price gap formed between the first and second lines is not closed
Example:
DIS,02 Apr, 1992. Chart 1d.
2- Ladder Bottom
Building:
• The candlestick pattern at the bottom of the ladder is a bullish 5-bar reversal pattern.
• It is formed by following these characteristics:
• The first three long black chandeliers, which resemble the formation of three black ravens, with successive lower openings and closings
• The fourth is also a black candlestick but with a short body and an upper wick.
• The fifth white candle that opens on the body of the fourth candle
Example:
CMA,30 Jul, 2012. Chart 1d.
3- Rising Three Methods & Falling
Building:
• The Rising Three Methods or Falling is a bullish 5-candle continuation candlestick pattern.
• It has a large green candle, 3 small red ones and a large green one that closes over the others. Or Contrary
• The three descending methods are the opposite of the three ascending methods and is a bearish continuation candlestick pattern.
Falling Three Methods
The three descending methods are the opposite of the three ascending methods and can be seen in a downtrend. The first bar in this pattern is dark bearish with a large real body. The next candles are expected to be smaller, bullish, light-colored ascending candles. These bars should not go beyond the maximum or minimum of the first bar. The last candle to complete the pattern must be lower than the close of the previous candle and must close below the close of the first candle.
That chart pattern experiences a price decline, recovers during the corrective phase, and then the decline resumes. The chandelier behaves in theory as it does in real life. It is a bearish continuation 71 percent of the time and a reversal the rest of the time. Unfortunately, with only 64 samples from 4.7 million candle lines studied, quality performance statistics are as rare as the candle itself.
Example:
KSU ,24 Dec, 2001. Chart 1d.
Rising Three Methods
Using three methods is a bullish continuation pattern that forms in an uptrend and the conclusion of which sees a resumption of that trend. This is the opposite of the three-drop method.
The three-method bottom-up pattern is formed when the price of a security meets these characteristics:
The first bar in the pattern is a bullish candle with a large real body within an obvious uptrend.
The next few candles, usually three consecutive small-bodied bearish candles trading above the low and below the high of the first candle.
The final bar is another bullish candle that has a large real body that breaks above the high and closes above the high and close of the first candle, suggesting that the bulls have once again controlled the direction of the value.
The bulls are in full control before pausing a bit to see if there is enough conviction in the trend. The series of small candles that fall between the first and the fifth candle in the ascending three-method pattern is considered a period of consolidation before the uptrend resumes. The decisive bullish candle is proof that the sellers did not have enough conviction to reverse the previous uptrend and that the buyers have regained control of the market. Active traders can apply the pattern as an indication to include in their long positions.
Example:
OMGBTC ,14 Sep, 00:00, 2008. Chart 6h.
4- Bullish Breakaway
Building:
• The breakaway candlestick pattern is a reversible five-bar candlestick pattern.
• It is a counterpart to Bearish breakaway
• The first candle must be long.
• The next three candles must be spinning tops.
• The second candle must also create a space between the first and itself.
• The fifth candle must be a long candle that closes within the body space of the first two candles.
Example:
DISCK ,06 May, 2015. Chart 1d.
5- Ladder Top
Building:
• The Ladder Top candlestick pattern is a 5-bar bearish reversal pattern that appears at the end of an uptrend.
• You can identify it with the following characteristics:
• The first three candles are always white with long real bodies that open and close above the open and close levels of the previous candle.
• The fourth candle should have a short white body with a long lower wick.
• The fifth candle should be a long black candle that opens below the true body of the fourth candle.
• Its opposite is Ladder Bottom.
How to identify the candlestick pattern at the top of the ladder?
The appearance of the candlestick pattern at the top of the ladder is a very rare phenomenon that occurs very rarely. As we already know that it is a bearish reversal pattern, therefore the predominant trend must be an uptrend or an uptrend. There are a few other suggestions that can be used to identify the pattern at the top of the ladder.
The first three candles are always white with long real bodies that open and close above the open and close levels of the previous candle.
The fourth candle should have a short white body with a long lower wick.
The fifth candle should be a long black candle that opens below the true body of the fourth candle.
Example:
DISCK ,05 Dec, 2016. Chart 1d.
6- Mat Hold Bullish & Bearish
Building:
The bullish Mat Hold Japanese candle formation is a highly reliable trend continuation pattern, which occurs in uptrend or downtrend markets and indicates that there is a high probability that the market will continue with the general trend of its trend. real.
Example:
With this we have finished all the relevant patterns in candles, congratulations you have finished everything. You can go easy, there are others but they are not relevant and they are created by other authors. These are the main ones. They work mostly in Forex and in cryptocurrencies from time to time they are useful, this topic is wide, but I like to teach a completely complete guide. This has just started, the next topic will be Heikin Ashi where it will not be as long as this, but I will try to explain ways to use it. Then we will continue with Line, BaseLine, etc.
Thank you very much for supporting.
注释
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