Types of Candlestick Patterns:
The candlestick patterns can be divided into:
- Continuation Patterns
- Bullish Reversal Patterns
- Bearish Reversal Patterns
Below is the list of 30 Types of Candlestick Patterns which is categorized in the above categories. In this section we will discuss about the Bullish Candlestick Pattern.
Bullish Reversal Candlestick Patterns:
Bullish Reversal candlestick patterns indicate that the ongoing downtrend is going to reverse to an uptrend. Thus, the traders should be cautious about their short positions when the bullish reversal candlestick chart patterns are formed.
Below are the different types of bullish reversal candlestick patterns:
Hammer:
Hammer is a single candlestick pattern that is formed at the end of a downtrend and signals bullish reversal. The real body of this candle is small and is located at the top with a lower shadow which should be more than twice the real body. This candlestick chart pattern has no or little upper shadow. The psychology behind this candle formation is that the prices opened and sellers pushed down the prices. Suddenly the buyers came into the market and pushed the prices up and closed the trading session more than the opening price.
This resulted in the formation of bullish pattern and signifies that buyers are back in the market and downtrend may end. Traders can enter a long position if next day a bullish candle is formed and can place a stop-loss at the low of Hammer.
Piercing Pattern:
Piercing pattern is multiple candlestick chart pattern that is formed after a downtrend indicating a bullish reversal. It is formed by two candles, the first candle being a bearish candle which indicates the continuation of the downtrend. The second candle is a bullish candle which opens gap down but closes more than 50% of the real body of the previous candle which shows that the bulls are back in the market and a bullish reversal is going to take place.
Bullish Engulfing:
The bullish engulfing candle appears at the bottom of a downtrend and indicates a surge in buying pressure. The bullish engulfing pattern often triggers a reversal in trend as more buyers enter the market to drive prices up further. The pattern involves two candles with the second candle completely engulfing the body of the previous red candle.
The Morning Star:
The Morning Star is multiple candlestick charts pattern which is formed after a downtrend indicating bullish reversal. It is made of 3 candlesticks, first being a bearish candle, second a Doji and the third being a bullish candle. The first candle shows the continuation of the downtrend, the second candle being a doji indicates indecision in the market, and the third bullish candle shows that the bulls are back in the market and reversal is going to take place. The second candle should be completely out of the real bodies of the first and third candles.
Three White Soldiers
The Three White Soldiers is a multiple candlestick pattern that is formed after a downtrend indicating a bullish reversal. These candlestick charts are made of three long bullish bodies which do not have long shadows and are open within the real body of the previous candle in the pattern.
White Marubozu
The White Marubozu is a single candlestick pattern that is formed after a downtrend indicating a bullish reversal. This candlestick has a long bullish body with no upper or lower shadows which shows that the bulls are exerting buying pressure and the markets may turn bullish.
Three Inside Up
The Three Inside Up is multiple candlestick pattern which is formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a long bearish candle, the second candlestick being a small bullish candle which should be in the range the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal.
Bullish Harami
The Bullish Harami is multiple candlestick chart pattern which is formed after a downtrend indicating bullish reversal. It consists of two candlestick charts, the first candlestick being a tall bearish candle and second being a small bullish candle which should be in the range of the first candlestick. The first bearish candle shows the continuation of the bearish trend and the second candle shows that the bulls are back in the market.
Tweezer Bottom
The Tweezer Bottom candlestick pattern is a bullish reversal candlestick pattern that is formed at the end of the downtrend. It consists of two candlesticks, the first one being bearish and the second one being bullish candlestick. Both the candlesticks make almost or the same low. When the Tweezer Bottom candlestick pattern is formed the prior trend is a downtrend.
Inverted Hammer
An Inverted Hammer is formed at the end of the downtrend and gives a bullish reversal signal. In this candlestick, the real body is located at the end and there is a long upper shadow. It is the inverse of the Hammer Candlestick pattern. This pattern is formed when the opening and closing prices are near to each other and the upper shadow should be more than twice the real body.
Three Outside Up
The Three Outside Up is multiple candlestick pattern which is formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a short bearish candle, the second candlestick being a large bullish candle which should cover the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal.
On-Neck Pattern
The on neck pattern occurs after a downtrend when a long real bodied bearish candle is followed by a smaller real bodied bullish candle which gaps down on the open but then closes near the prior candle’s close. The pattern is called a neckline because the two closing prices are the same or almost the same across the two candles, forming a horizontal neckline.
