Bullish and Bearish Candle Stick Formations

The Tweezer Tops

The Tweezer Top Price Action key characteristics: Topping Price Action where the height of both candles is nearly identical Quite common pattern that can occur at the top of a trend, marking potential trend reversals Tweezer Tops are more reliable when they occur at market Highs rather than the Lows.

Dark Cloud Cover

The Dark Cloud Cover key characteristics: The Dark Could Cover pattern occurs at key trade locations such as major resistance levels The first candle is green with a long body followed by a bear close on the second candle The retracement of the second candle must be at-least 50% of the previous green candle as this will greatly increases bearish follow through.

The Bearish Harami

The Bearish Harami key characteristics: The Bearish Harami pattern is suggestive of a change in momentum, it it’s identifiable at the top of up-trends. The pattern consists of a bullish candle with an inside bar close (second candle) The Inside Bar candle should be no larger than 25% of the bullish candle.

Bullish Engulfing

The Bullish Engulfing Characteristics: The Bullish Engulfing pattern occurs most often at the bottom of a trend, it is indicative of an influx in volume (buying pressure) The typically trigger is an impulse and a change in Price Action direction (Sell pressure tapering of) The length of the Bullish candle must ‘Engulf’ the previous red candle.

Bearish Engulfing

The Bearish Engulfing Characteristics: The Bearish Engulfing pattern occurs usually at the top of an uptrend, a sign of exhaustion in buying pressure followed by a reversal. The Bearish candle must open at or above previous candle close The Length of the Bearish Candle is to cover the previous candle (suggestive of seller’s stepping into the market).

Tweezer Bottom

Characteristics of the Tweezer Bottom: The Tweezer Bottom usually occurs at the bottom of a downtrend and is indicative of buying pressure leading up to an impulse in the opposite direction. The bottom of the Two candles is nearly identical, this indicates strength in support (sellers can’t push price down further). Buyer’s step in with a surge in volume, causing price action to impulse away.

Bullish Harami

Characteristics of the Bullish Harami: The Bullish Harami typically forms at the bottom of a down-trend, signalling a potential sign in change of direction. The inside bar candle should not be larger than 25% of the previous bearish candle The pattern consists of a bearish candle with an inside bar close before a strong expansion.

Bearish Hanging Man

Characteristics of the Hanging Man: The Hanging Man typically forms at the top of a trend and is indicative of buyer weakness, in essence, the demand for price at the peak wears of. The candle must have a small body with a long lower wick, at least twice the length of the body. The candle pattern should be backed with increasing volume leading to a sell off, this will increase the probability a true reversal.

Bearish Shooting Star

Characteristics of the Shooting Star: The Bearish Shooting star is indicative of a sharp reversal in the immediate trend – sellers’ step in to push price back down as buyer’s become exhausted. The Open, Low and Close of the candle must be roughly be at the same place The wick of the candle must be at-least twice the length of the body, this indicates weak buy pressure.

Gravestone Doji

Characteristics of the Gravestone Doji: The Gravestone Doji is a bearish formation where the Open, Low and Close are nearly identical – Bulls Failed to push price above market, allowing sellers to step in before the candle close. The long wick is indicative of Supply, allowing sellers to step in with aggression as Demand fails to exist. The Gravestone Doji allows for identification of potential resistance at key trade locations.

Dragonfly Doji

Characteristics of the Dragon Fly Doji: The Dragonfly Doji is a bullish formation where the Open, High and Close are nearly identical (reverse of the Shooting Star) The wick of the candle is indicative of sell pressure that failed to break lower, hinting absorption by the buyers. The Dragonfly Doji is analytical of a probable trend reversal in the immediate short-term, price action usually follows with an impulse.

Bearish Spinning Top

Characteristics of the Bearish Spinning Top: The Bearish Spinning Top formation has a short body that is centred equally between the high and low of the wick. This formation is indicative of buyer’s and seller’s indecision, a bearish close following gives confirmation. A Spinning Top at the highs of a trend is a strong indication of exhaustion from the buyer’s, leading into a bearish expansion.

Bullish Spinning Top

Characteristics of the Bullish Spinning Top: A Bullish Spinning Top like the Bearish Spinning top has Open, Highs and Close nearly identical. This Price Action formation is indicative of indecision at the lows of a trend, bullish follow through gives it confirmation. A Spinning Top at the low of a down-trend is a strong indication of exhaustion from the seller’s, leading into a Bullish Expansion.

Bullish Hammer Candle

Characteristics of the Bullish Hammer Candle: The Bullish Hammer Candle is a typical reversal pattern found most often at the bottom of a downtrend or a higher low. The candle formation must have a short body with the wick being at least 2 times the length. The pattern is indicative of a trend reversal to the upside or a rejection from a key trade location.

Bullish Inverted Hammer

Characteristics of the Bullish Inverted Hammer Candle: The Bullish Inverted Hammer candle typically occurs at the bottom of the downtrend- followed by a bullish expansion. The Open, High, and Close are nearly identical, this is indicative of buyer’s absorbing sellers at the current low. Price Action is to be followed with an impulse for activation, this confirms seller’s being exhausted.

Bearish-Evening Star

Characteristics of the Bearish Evening Star: The Bearish Evening Star is a reversal pattern that typically forms at the top of an up-trend. The pattern is built from three candle sticks, a large Bullish candle, Small bearish candle, and a large Bearish candle. Buyer exhaustion becomes apparent on the second (smaller bearish) candle with volume follow through on the third. The third candle is responsible for the shift in momentum, price action tends to follow through with a strong Bearish Volatility Expansion.

Evening Doji Star

Characteristics of the Bearish Evening Doji Star: The Bearish Evening Doji Star is very similar to the Evening Star, the differentiating factor is the Doji Candle. The Doji Candle signals uncertainty between the buyer’s and sellers at the top of an up-trend, confirmation is with an impulse sell from the third candle. Supply become apparent in overtaking Demand at the highs, thus seller dominate with a fall in price.

Three Black Crows

Characteristics of the Bearish Three Black Crows: The Three Black Crows is a bearish candle stick formation that is typical at the top of an up-trend. This pattern becomes relevant when seller’s overtake buyers on three consecutive candle closes, causing price to close at the lows. Sell pressure becomes immense and is usually followed with a strong Bearish Volatility Expansion. The pattern allows for an increased probability for a start of a bear trend, epically if it’s on higher timeframe.

Three White Soldiers

Characteristics of the Bullish Three White Soldiers: The Three White Soldiers is a Bullish pattern that signals a potential reversal in an established downtrend. The formation is indicative of a strong change in market sentiment, this is typically followed with a strong Bullish Volatility Expansion. Each body candle close must be above the close of the previous candle, this is suggestive of buyer’s gaining control of the market.

Morning Star

Characteristics of the Morning Star: The Morning Star is a bullish formation at the bottom of a down-trend, typically indicates the start of a Bullish Volatility Expansion. Sellers become exhausted at the lows, failing to push price further as absorption buy the buyers becomes apparent. A Price Action impulse usually follows suit, leading to a Bullish Expansion and a change of trend.

Morning Star Doji

Characteristics of the Morning Star Doji: The Morning Star Doji is a bullish reversal formation, like the Morning Star with the only differentiation being the ‘Doji’ candle stick. Such patterns form at the bottom of a down-trend, showing indecision in the market as seller’s fail to push price down further. The Doji shows buy pressure stepping in at the lows, (strong Demand), thus is followed by an impulse and a Bullish Expansion.