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Bearish Dark Cloud
1st day is a long white day.
2nd day is a black day which opens above the 1st day's
high.
2nd day closes within the 1st day, but below the
midpoint.
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Psychology
A long white candlestick is formed on
the 1st day and a gap up is created on the 2nd day. This
is encouraging to the bulls. However, the 2nd day closes
below the midpoint of the 1st day. Longs quickly
question their strategy.
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Bearish Doji Star
1st day is a long white day.
2nd day is a doji day that gaps above the 1st day.
The doji shadows shouldn't be excessively long.
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Psychology
The uptrend is in full force with a
strong 1st day. All confidence built up by the bulls
from the 1st day is destroyed when the 2nd day's gap up
closes near its open. Profit takers will quickly appear
if the next day opens lower.
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Bearish Engulfing Pattern
The color of the 1st day's body reflects
the trend, however could be a doji.
The 2nd day's real body engulfs the 1st day's body.
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Psychology
If not much volume occurs on the 1st day
of the Bearish Engulfing formation compared to the 2nd
day, then this increases the strength of the pattern.
The 2nd day opens above the close of the 1st day,
however quickly sells off to finally close below the
open of the 1st day. This scares the longs and brings
into question the bull trend which prompts additional
selling in the coming days.
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Bearish Evening Star
1st day is a long white day.
2nd day gaps above the 1st day's close.
3rd day is a long black day.
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Psychology
The 2nd day gaps higher, but trades in a small range.
The bearishness of this indecision is confirmed by the
lower close of the 3rd day. Look for lower prices.
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Bearish Evening Doji Star
1st day is a long white day.
2nd day is a doji which gaps above the 1st day's close.
3rd day is a black day.
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Psychology
The bearishness of the doji star created
on the 1st two days is confirmed with the 3rd day. If
the penetration of the 3rd day is more than 50 percent,
then this formation has a much better chance to succeed
for the trader.
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Bearish Hanging Man
Small real body at the upper trading
range.
Color of the body is not important.
Long lower shadow at least twice the length of the body.
Little or no upper shadow.
Previous trend should be bullish.
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Psychology
As with any single candlestick,
confirmation is required. The Hanging Man formation
shows the price goes much lower than the open then
closes near the opening price. This could mean that many
longs have positions that they are attempting to sell.
Ideally, a black real body Hanging Man with a lower open
the following day could be a bearish signal for the days
ahead.
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Bearish Harami
The 1st day is a long white day.
The 2nd day is a short day whose body is engulfed by the
1st day's body.
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Psychology
A long 1st day with high volume in the
existing uptrend brings complacency to the bulls. The
next day trades in a small range within the previous
day's real body. Light volume on the 2nd day should give
rise to concern by the bulls of an impending change of
trend. Look for lower prices over the coming days,
especially if the next day provides confirmation of a
trend change by closing lower.
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Bearish Harami Cross
The 1st day is a long white day.
The 2nd day is a doji day that is engulfed by the 1st
day's body.
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Psychology
The 2nd day's price range does not pierce the
previous day's range and closes about where it opened.
Volume on the 2nd day is low which indicates that
traders are lacking enough information to decide whether
to go long or short.
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Bearish Shooting Star
Price gap open to the upside.
Small real body formed near the bottom of the price
range.
The upper shadow at least three times as long as the
body.
The lower shadow is small or nonexistent.
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Psychology
The long upper shadow and small real
body at the bottom of the trading range are cause for
concern by the bulls. They wonder if this is the end of
the uptrend and take measures to protect their gains.
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Bullish Doji Star
1st day is a long black day.
2nd day is a doji day that gaps below the 1st day.
The doji shadows shouldn't be excessively long.
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Psychology
The downtrend is in full force with a strong
1st day. All confidence built up by the bears from the 1st
day is destroyed when the 2nd day's gap down closes near
it's open. Short covering will quickly appear if the next
day opens higher.
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Bullish Engulfing Pattern
The color of the 1st day's body reflects the
trend, however could be a doji.
The 2nd day's real body engulfs the 1st day's body.
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Psychology
If not much volume occurs on the 1st day of
the Bullish Engulfing formation compared to the 2nd day,
then this increases the strength of the pattern. The 2nd day
opens below the close of the 1st day, however quickly
rallies to close above the open of the 1st day. This damages
the spirits of the shorts and brings into question the bear
trend which prompts additional buying in the coming days.
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Bullish Hammer
Small real body at the upper trading range.
Color of the body is not important.
Long lower shadow at least twice the length of the body.
Little or no upper shadow.
Previous trend should be bearish.
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Psychology
As with any single candlestick, confirmation
is required. The Bullish Hammer formation shows the price
goes much lower than the open then closes near the opening
price. This fact reduces the confidence of the bears.
Ideally, a white real body Hammer with a higher open the
following day could be a bullish signal for the days ahead.
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Bullish Harami
The 1st day is a long black day.
The 2nd day is a short day whose body is engulfed by the 1st
day's body.
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Psychology
A long 1st day with high volume in the
existing downtrend brings complacency to the bears. The next
day trades in a small range within the previous day's real
body. Light volume on the 2nd day should give rise to
concern by the bears of an impending change of trend. Look
for higher prices over the coming days, especially if the
next day provides confirmation of a trend change by closing
higher.
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Bullish Harami Cross
The 1st day is a long black day.
The 2nd day is a doji day that is engulfed by the 1st day's
body.
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Psychology
The 2nd day's price range does not pierce
the previous day's range and closes about where it opened.
Volume on the 2nd day is low which indicates that traders
are lacking enough information to decide whether to go long
or short.
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Bullish Inverted Hammer
Small real body formed near the bottom of
the price range.
The upper shadow is no more than two times as long as the
body.
The lower shadow is small or nonexistent.
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Psychology
The long upper shadow and small real body at
the bottom of the trading range are cause for concern by the
bears. They wonder if this is the end of the downtrend and
take measures to protect their gains. If the next day opens
above the body of the Inverted Hammer, then expectations
could be for shorts to cover and propel a reversal rally.
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Bullish Morning Star
1st day is a long black day.
2nd day gaps below the 1st day's close.
3rd day is a long white day.
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Psychology
The 2nd day gaps lower, but trades in a
small range. The bullishness of this indecision is confirmed
by the higher close of the 3rd day. Look for higher prices.
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Morning Doji Star
1st day is a long black day.
2nd day is a doji which gaps below the 1st day's close.
3rd day is a white day.
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Psychology
The bullishness of the doji star created
on the 1st two days is confirmed with the 3rd day. If
the penetration of the 3rd day is more than 50 percent,
then this formation has a much better chance to succeed
for the trader.
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Bullish Piercing Pattern
1st day is a long black body.
2nd day is a white body which opens below the low of the
1st day.
2nd day closes within, but above the midpoint of the 1st
day's body.
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Psychology
The gap down on the 2nd day perpetuates
the downtrend. However, the 2nd day's close is above the
midpoint of the 1st day's body. This suggests to the
bears that a bottom could be forming. This price action
is not nearly as discernable using bar charts as it is
with candlestick charts. The more penetration of the
close on the 2nd day to the 1st day's body, the more
probable the reversal signal will succeed.
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