CANDLE CONSTRUCTION Bearish Belt Hold

- the halfway point of the real body of a belt hold should be

monitored for a possible price reversal during later price swings.

REVERSAL PHENOMENA

REAL BODIES

Hanging Man
- umbrella line that develops after a rally
- shadow should be at least twice the size of the real body
- bearish pattern
- if appears after a prolonged up move, should be treated with
respect, especially if it occurs after a gap
- color of the body is not important
- better to see some confirmation

- Transparent (white) – close is higher than the opening

- Solid (black) – opening is higher than the close

SPINNING TOPS

Hammer
- occurs after a market decline, when it is a bullish sign

DARK CLOUD COVER (KABUSE)

Doji – opening and closing prices either are the same or very close
to each other
Spinning top – represent a battle between the bulls and bears
- Indicate indecision, where participants cannot
agree on whether prices should rally or react.
- When they appear after a prolonged rally or
reaction, it is a sign that upside or downside
momentum is dissipating.
- initial signs a trend may be in the process of
reversing
Umbrella line – opening and closing prices develop close to the
high of the day
- tend to be bullish after a decline and bearish
following an advance
- if develop within the confines of a trading range,
no real significance
- implies lower prices
- a form of key reversal, since the prices closes down on the day
BELT-HOLD LINES (YORIKIRI)
after a gap higher opening
- consist of 2 days’ price action
- Traders look for the price to continue lower on the next (third)
candle, called confirmation

The five criteria for the Dark Cloud Cover pattern are:
1. An existing bullish uptrend
2. An up (bullish) candle within the uptrend
3. A gap up on the following day
Bullish Belt Hold
4. The gap up turns into a down (bearish) candle
- the longer the real body, the more positive the candlestick
5. The bearish candle closes below the midpoint of the previous
- if does not appear on the chart for a quite a while, it is an
bullish candle
unusual phenomenon, it gains in importance.
 Bearish Engulfing Pattern
PIERCING LINE (KIRIKORNI)

- Can occur anywhere, but it is more significant if it occur after a

price advance
- Far less significance in choppy markets

STARTS (HOSHI)
- Combination of wide real bodies and spinning tops
- Consist of two long real bodies separated by a spinning top

Bullish Morning Star

- “sunny sky” exact opposite of the dark cloud

- Bullish pattern
- Two-day, price pattern that marks a potential short-term reversal
from a downward trend to an upward trend

Three additional important characteristics:

1.The pattern is preceded by a downward trend in price. (This may
be only a short down trend, but if the candles appear after an
upward trend in price it is not an important reversal indicator.
2.The price gaps lower to begin the second day. (This pattern is
mostly found in stocks because of their ability to have overnight - made up of a tall black candlestick, a small black or white
gaps unlike currencies or other 24 hour trading asset. This candlestick with a short body and long wicks, and a third tall
pattern may occur in any asset class on a weekly chart white candlestick
however.) - middle candle captures a moment of market indecision
3.The second candle must close above the midpoint of the first where the bears begin to give way to bulls. Third candle
candle. (This signifies that buyers overwhelmed sellers on this confirms the reversal and can marks as new uptrend
day.)
Bearish Evening Star

ENGULFING PATTERN (TSUTSUMI)

- characterized by two consecutive, relatively shadow less, real
bodies in which the real body of the second day “engulf” that
of the first.
- Bullish in downtrend, when the second day is a white body
- Bearish in an uptrend, when it appears as a black one
- Should look not only to the two candlestick which form the
bullish engulfing pattern but also to the preceding candlestick - used to predict future price declines
- rare pattern but considered a reliable technical indicator
Bullish Engulfing Pattern that a downward trend has begun
- Opposite of the morning star

Cancelled Evening Star

- More likely to signal reversal when they are preceded by four or

more black candlestick
DOJI STAR SHOOTING STAR
- Open and close that are virtually equal and are often components in - Daily price action experience a small gap, where the real body
pattern appears at the end of a long wick or upper shadow
- Look like a cross, inverted cross or plus sign - Occurs after an advance and indicates the price could start falling
- Alone, doji are neutral patterns that are also featured in a number of - Traders typically wait to see what the next candle does following a
important patterns shooting star. If price declines during the next period they may sell
or short
Bearish Evening Doji Star - If the price rises after a shooting star, the formation may have been
a false signal or the candle is marking a potential resistance area
around the price range of the candle

Bearish Shooting Star

Bullish Morning Doji Star

Bullish Shooting Star

UPSIDE GAP TWO CROWS (Narabi Kuro)

Long Legged Doji

- Bearish formation consist of a long white line followed by two
black lines
- First black line gaps to the upside
- The third day often closes the gap, but because it is a black line
where the close is below the open, its implication is bearish

THREE BLACK CROWS (Sanba Garasu)

- Three declining black candlestick, which form after an

advance, indicate lower prices
- Each candlestick should close at or near its session low
- None of them have a lower wick and each of the three real
bodies opens within the range or right at the bottom of the
previous session’s real body
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