10 commonly used and effective candlestick patterns that traders often look for when analyzing stocks:
1. Bullish Engulfing Pattern: This pattern occurs when a small red candlestick is followed by a larger green candlestick that completely engulfs the previous day's candlestick. It suggests that the bulls have taken control of the market, and a trend reversal from bearish to bullish is likely.
2. Bearish Engulfing Pattern: This pattern is the opposite of the Bullish Engulfing Pattern. It occurs when a small green candlestick is followed by a larger red candlestick that completely engulfs the previous day's candlestick. It suggests that the bears have taken control of the market, and a trend reversal from bullish to bearish is likely.
3. Hammer Pattern: This pattern occurs when the price opens and trades lower but then rallies to close near the open. The resulting candlestick looks like a hammer, with a small body and a long lower wick. It suggests that the bulls are trying to take control of the market and a bullish reversal may occur.
4. Inverted Hammer Pattern: This pattern is the opposite of the Hammer Pattern. It occurs when the price opens and trades higher but then sells off to close near the open. The resulting candlestick looks like an inverted hammer, with a small body and a long upper wick. It suggests that the bears are trying to take control of the market, and a bearish reversal may occur.
5. Doji Pattern: This pattern occurs when the opening and closing prices are very close to each other, resulting in a candlestick with a small body and long upper and lower wicks. It suggests that the market is indecisive and that a trend reversal may occur. The pattern can be either bullish or bearish depending on its position in the chart and the preceding trend.
6. Morning Star Pattern: This pattern occurs over three days. On the first day, there is a long red candlestick, indicating a bearish trend. On the second day, there is a small candlestick, either red or green, that opens lower than the previous day's close and closes higher than the previous day's open. This indicates indecision. On the third day, there is a long green candlestick, indicating a bullish trend. This pattern suggests a trend reversal from bearish to bullish.
7. Evening Star Pattern: This pattern is the opposite of the Morning Star Pattern. It also occurs over three days. On the first day, there is a long green candlestick, indicating a bullish trend. On the second day, there is a small candlestick, either red or green, that opens higher than the previous day's close and closes lower than the previous day's open. This indicates indecision. On the third day, there is a long red candlestick, indicating a bearish trend. This pattern suggests a trend reversal from bullish to bearish.
8. Three White Soldiers Pattern: This pattern occurs when there are three long green candlesticks with small or no wicks that close progressively higher each day. This indicates a strong bullish trend and suggests that the price is likely to continue to rise.
9. Three Black Crows Pattern: This pattern is the opposite of the Three White Soldiers Pattern. It occurs when there are three long red candlesticks with small or no wicks that close progressively lower each day. This indicates a strong bearish trend and suggests that the price is likely to continue to fall.
10. Shooting Star Pattern: This pattern occurs when the price opens and trades higher but then sells off to close near the open. The resulting candlestick has a long upper wick and a small body, resembling a shooting star. It suggests that the bears are trying to take control of the market, and a trend reversal from bullish to bearish may occur.
It is important to note that these candlestick patterns should be used in conjunction with other technical and fundamental analysis tools to make informed trading decisions.
Post a Comment