Candlestick Patterns

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Dragonfly Doji
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Terms in this set (96)
Dragonfly Doji
A type of candlestick pattern that signals indecision among traders. deemed to be a reliable signal that the trend is about to change direction
Image: Dragonfly Doji
Gravestone Doji
A gravestone doji pattern is a common reversal pattern used by traders to suggest that a bullish rally or trend is about to reverse. It can also be found at the end of a downtrend, but this version is much more rare. As you can see from the chart, on the day of the gravestone doji (shown within the black box), bearish traders realized that the price was pushed up to unjustifiably high levels so they send the price back up to where the stock opened. The close near the day's low suggests that supply is starting to outweigh demand again.
Image: Gravestone Doji
Hammer
A hammer occurs after a security has been declining, possibly suggesting the market is attempting to determine a bottom.

The signal does not mean bullish investors have taken full control of a security, it simply indicates that the bulls are strengthening.
Image: Hammer
Hanging Man
This formation does not mean that the bulls have definitively lost control, but it may be an early sign that the momentum is decreasing and the direction of the asset may be getting ready to change. The reliability of this signal is drastically improved when the price of the asset decreases the day after the signal. Hanging man formations can be more easily identified in intraday charts than daily charts and are a very popular formation used by day traders.

If this pattern is found at the end of a downtrend, it is known as a "hammer".
Image: Hanging Man
Inverted Hammer
The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and can act as a warning of a potential reversal upward. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy.
Image: Inverted Hammer
Shooting Star
The Shooting Star candlestick formation is viewed as a bearish reversal candlestick pattern that typically occurs at the top of uptrends.
Image: Shooting Star
Doji
Image: Doji
High Wave
The high wave candle expresses doubt and confusion on the part of the market. Until the situation becomes clear, traders should emphasize careful stock selection and minimize position size.

They are indicative of a market in which uncertainty and indecision prevail. Neither the buyers nor the sellers have a clear sense of which direction the market will head. The forces of supply and demand are equally balanced.
Image: High Wave
Spinning Top
If a spinning top formation is found after a prolonged uptrend, it suggests that the bulls are losing interest in the stock and that a reversal may be in the cards. On the other hand, if this formation is found in an defined downtrend, it suggests that the sellers are losing conviction and that a bottom may be forming.
Image: Spinning Top
Bear Harami
Uptrend to downtrend; occurs after a large bullish candle stick meets a smaller bearish candlestick. Bulls lost control over the uptrend. Blended candle analysis; bearish + bullish = a shooting star candle stick. A resistance level is created, if tested and fails, downtrend will continue. A Doji can meet the bullish candle stick, and may begin the downtrend.
Image: Bear Harami
Bearish Engulfing
Uptrend to Downtrend: First day should be a bullish candle stick (or a Doji), the second day is a large real body bearish candle stick. Second day high is higher then the first day low, and lower then the first day low. Gap up is created from bulls taking control. The bears reject this and take control moving the price downwards (bullish gain is lost). Blended candle analysis; bullish candle + bearish candle = a bearish shooting star. Bearish candle stick should be on high volume.
Image: Bearish Engulfing
Bullish Harami
Downtrend to uptrend, or vise versa; starts with a large bullish real body, followed by a small real body or a doji. The bearish harami occurs during levels. The bullish candlestick is a reversal of the downtrend. Blended candle analysis; bearish + bullish = a hammer (smaller then both of them); is a bullish candlestick pattern, has a large low opening. The bullish hammer is were the support area will lie, prices may test the support area in further trends; prices will continue to head higher.
Image: Bullish Harami
Bullish Engulfing
Downtrend to Uptrend; a medium size bearish candlestick is met by a large bullish candlestick. The second day highs are higher, and the lows are lower. Gap down is created, bulls reject bears and close higher. Blended candle analysis; bearish + bullish = a shooting star candle stick. The Bullish Engulfing pattern may create a support line for future prices. High volume should confirm the second day bullish candlestick.
Image: Bullish Engulfing
Dark Cloud Cover
This pattern creates a mid term resistance level (25 days). First day is a large bullish candlestick real body. The second day is a large bearish real body; the bearish candlestick must close within 50% of the first day bullish candlestick (this may suggest a downtrend). If the bearish candle stick closes at the lowest point, then this will be apart of a bearish engulfing pattern. Blended candle analysis; bearish + bullish = a hammer (smaller then both of them, high shooting star). The second resistance test will come from a large bearish candle stick; prices will then fall further down (did not break resistance level).
Image: Dark Cloud Cover
Piercing Pattern
Two day Downtrend to uptrend; first day has a large bearish candlestick. The second day a bullish candlestick opens lower but continues to fight upwards, the bullish high is still lower then the bearish high. The higher the counter incline of the second candlestick, the stronger the pattern is. Blended candle analysis; day 1 plus day 2 equals a hammer candle stick. If bearish pattern following a second day bullish candlestick, then bearish hammer will follow. Draw resistance line for a bearish reversal (downtrend), draw support for a bullish reversal (uptrend). Three major characteristics; the greater the second day's bullish candlestick the stronger the pattern, the failure to penetrate support by the bears at the end of the day, and high volume accompanies the second day bullish candlestick; many traders are short and want to cover their position before a bullish uptrend.
Image: Piercing Pattern