A fast move makes the market overextended and vulnerable to profit taking.

Too much consolidation around any S or R level, implies lesser chances for it to hold
and more chance for it to break out. (A S/R level demands quick reversal around it)

Volume: Only few candlestick patterns demand rising volume for them to be effective, like
Hammer (more people will be stuck on opposite side), Engulfing pattern.

Note that a prior trend is a must for any candlestick pattern to make any sense. A pattern
formed in the choppy market don’t make any sense.

Source:
JAPANESE CANDLESTICK CHARTING TECHNIQUES By Steve Nison
https://www.ig.com/en/trading-strategies/16-candlestick-patterns-every-trader-should-know-
180615
Investopedia

Reversal Patterns
Hammer
Shooting Star
Inverted Hammer
Hanging Man
Piercing Line
Dark Cloud Cover
Morning Star
Evening Star
Engulfing Pattern
Harami
Spinning Top
Abandoned Baby
Tri-Star
Tweezers Top and bottoms

Continuation Patterns
Falling Three Method
Rising Three Method
Three White Soldiers
- Advance block
- Stalled/Deliberation Pattern
Three Black Crows
Two black gapping
Hammer

1. The real body is at the upper end of the trading range. The color of the real body is not
important, but green hammers indicate a stronger bull market than red hammers.
2. A long lower shadow should be twice the height of the real body
3. It should have no, or a very short, upper shadow.

Bearish counterpart: Shooting Star

Inverse/Inverted hammer

Little or no lower shadow

Suggests that buyers will soon have control of the market.

Should wait for confirmation to trade on inverted hammer.
Gap up, opening price of next session could act as nice confirmation.

Counterpart: Hanging Man

Piercing line

There is usually a significant gap down (result of first strong red candle) in second candle,
followed by strong green candle (closing above mid-way).

Counterpart: Dark Cloud Cover

Morning star
It is a three-stick pattern: one short-bodied candle between a long red and a long green.
Traditionally, the ‘star’ (body part) will have no overlap with the longer bodies or the first body.
And third candle is supposed to have atleast 50% penetration in the first body.

Counterpart: Evening Star

Three white soldiers

Consists of consecutive long green (or white) candles with small wicks, which open and close
progressively higher than the previous day.
It is a very strong bullish signal that occurs after a downtrend, and shows a steady advance of
buying pressure.

Counterpart: Three black crows

Extras:
Advance block
Similar to Bullish Three White Soldiers Pattern. It is characterized by three long white candles
with consecutively higher closes. Each successive day is weaker than the one preceding it,
which suggests that the rally is losing strength and there is possibility of a reversal in trend.

If the second and third, or just the third candlestick, show signs of weakening it is an advance
block pattern. This means that the rally is running into trouble and that longs should protect
themselves. Be cautious, if it appeared after strong downtrend.

Stalled Pattern/Deliberation Pattern

Last two candlesticks are long white ones that make a new high followed by a small white
candlestick discloses a deterioration of the bulls' power

Although the advance block and stalled patterns are not normally top reversal patterns,
they can sometimes precede a meaningful price decline.

Bearish Engulfing Pattern

Second candle’s body should engulf the first candle’s body (shadows not necessary).

Some factors that would increase the likelihood of reversal:

- Heavy volume on second candle can strengthen the reversal probability.
- Smaller the first candle body and larger the second candle body.
- If the second day of the engulfing pattern engulfs more than one real body.
Spinning Top

Short body centred between wicks of equal length. The pattern indicates indecision in the
market (both events are possible with equal probability, trend continuation or the reversal). It is
generally followed by a strong up/down move.
Think about the spinning top as “The calm before the storm”.
Example:

The Difference Between a Spinning Top and a Doji:

Spinning tops and dojis both represent indecision. Dojis are smaller, with small real bodies and
small upper and lower shadows. The Spinning top has long upper and lower shadows.Both
types of candlesticks rely heavily on confirmation.
Falling three methods

Continuation pattern, formed of a long red body, followed by three small green bodies, and
another red body – the green candles are all contained within the range of the bearish bodies.

The ideal number of small candlesticks is three but two or more than three are also acceptable
as long as they basically hold within the long red candlestick's range.

The final day should be a strong green body session with a close above the first day's close.
The final candlestick line should also open above the close of the previous session.

Counterpart: Rising three method

Harami
Second session has a minute real body relative to the prior candlestick and that this small real
body is inside the larger one. The size of the shadows are usually not important in either a
harami or harami cross.

Harami cross: It has a doji for the second day of the harami pattern instead of a small real body.

Harami pattern is usually not as much of a significant reversal signal as are, say, the hammer,
hanging man, or engulfing patterns.

Tweezers Top and bottoms

Tweezers are two or more candlestick lines with matching highs or lows.
Tweezers top is formed when the highs match. In a falling market, a tweezers bottom is made
when the lows are the same.
They take on importance especially when they occur after an extended move and contain other
bearish (for a top reversal) or a bullish (for a bottom reversal) candlestick signals.

Abandoned Baby:
Doji appearing at bottom of a downtrend, followed by a bullish gap up remarks change in trend
(much like morning star)

Two Black Gapping

Appears after a notable top in an uptrend, with a gap down that yields two black bars posting
lower lows.
It predicts that decline will continue to even lower lows, perhaps triggering a broader-scale
downtrend. According to Bulkowski, this pattern predicts lower prices with a 68% accuracy rate.

Tri-Star
Tri-star patterns form when three consecutive doji candlesticks appear at the end of a prolonged
trend.
A tri-star pattern near a significant support or resistance level increases the probability of a
successful trade.
The shadows on each doji are relatively shallow signaling a temporary reduction in volatility.