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Candlestick Pattern.

 
Post new topic   This topic is locked: you cannot edit posts or make replies.    iCharts Discussions Forum Index -> Here I talk technically - Technical Bytes by HM
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Author Candlestick Pattern.
hemant.icharts
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Joined: 10 May 2011
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Post: #1   PostPosted: Fri Jan 03, 2014 4:03 pm    Post subject: Candlestick Pattern. Reply with quote

Bullish Candle: The filled Green rectangular part is called the "Real Body" of the candle. It is formed between Open and Close price for the period selected. The thin lines above and below of the real body are called Shadows. Shadow on lower side of the real body is Low of the period and the shadow on upper part of the body is High of the period. Candle is considered to be Bullish when Closing price of that period is above the Opening price.

Please refer the image below


Bearish Candle:The filled Red rectangular part is called the "Real Body" of the candle. It is formed between Open and Close price for the period selected. The thin lines above and below of the real body are called Shadows. Shadow on lower side of the real body is Low of the period and the shadow on upper side of the body is High of the period. Candle is considered to be Bearish when Closing price of that period is below the Opening price.

Please refer the image below
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hemant.icharts
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Post: #2   PostPosted: Fri Jan 03, 2014 4:22 pm    Post subject: Reply with quote

Spinning Top:Long candle with a small real body is called “Spinning Top”. As we see there are long shadows at both the ends and a small real body. Please note that the shadow size is not important here; real body should be small for spinning top. When spinning tops forms after an extended trend, they show a sign that the strength of the existing momentum is slowing down. Spinning top is part of many candlestick patterns like Morning/Evening star, Harami, Hammer etc.

Please refer the image below
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hemant.icharts
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Post: #3   PostPosted: Fri Jan 03, 2014 4:25 pm    Post subject: Reply with quote

Doji: Note the pattern in this image, and there is no real body. These types of candles are called “Doji”. This type of candle forms when Open and Close prices are almost equal for the period selected (Open and Close price can be very near). This is generally formed when momentum is shifting. They can be termed as significant reversal indicators.
There are three basic ways to interpret a Doji:

1) When there are consecutive Dojis forming, then there is a high probability of reversal.

2) Market is in overbought or oversold region.

3) When a chart as a whole has numerous Doji formations, then for that scrip Doji interpretation should be avoided.


Refer the image below
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hemant.icharts
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Post: #4   PostPosted: Fri Jan 03, 2014 4:29 pm    Post subject: Reply with quote

Couple of pointers on Doji:

If Doji has formed in a Bull Run and if in future sessions, prices have not to been able to break the low of Doji, then the bull trend may continue. Vice versa for the bear trend.

One must take note of the candle prior to Doji. If the body of prior candle is small then the Doji may not be significant.

Types of Doji:

Doji after tall white candle : Doji after a white candle in an overbought region or after an extended bullish trend.

Northern Doji: Doji in a bull trend.

Southern Doji : Doji in a bear trend.

Long Legged Doji : Doji where shadows (high and low) are very tall.

Dragonfly Doji : Where open, close and high are same (they can be very near) and there is lower shadow.

Gravestone Doji : Where open, close and low are same (they can be very near) and there is higher shadow.


Please refer the image below
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hemant.icharts
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Post: #5   PostPosted: Fri Jan 03, 2014 4:30 pm    Post subject: Reply with quote

-> There was Gravestone Doji formed (Point a) but immediately next candle formed was a Dragonfly Doji, which closed above the Close of earlier Doji and then later in the next candle, High of the Gravestone Doji was taken out, indicating the strength in existing trend

-> There was Northern Doji (Point b) after tall white candle whose High was not taken out and next few candles were not able to close above the Doji, showing sign of weakness.


Please refer the image below
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hemant.icharts
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Post: #6   PostPosted: Fri Jan 03, 2014 4:31 pm    Post subject: Reply with quote

Examples of Doji

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hemant.icharts
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Post: #7   PostPosted: Mon Jan 06, 2014 10:56 am    Post subject: Reply with quote

Hammer & Hanging Man: Note the pattern in the image, there is long shadow and small real body. These types of candles are called “Umbrella Lines”. When they form in a downtrend they are called “Hammer” and when they form in an uptrend they are called “Hanging Man”.

Please refer the image below.




-> The real body should be on top of the candle. The color of body is not important.

-> There should be no or very small upper shadow to the candle.

-> They should be a lower shadow which should be two times or more than the real body.

-> “Hammer” is formed after a bear trend and “Hanging Man” is formed after a bull trend. “Hammer” forming after short bear trend is valid but “Hanging Man” is valid only after an extended bull run.

-> “Hanging Man” needs a confirmation i.e. In next few sessions low made by Hanging Man should be broken, but for “Hammer” confirmation may not be required.




Examples of Hammer and Hanging Man

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Post: #8   PostPosted: Wed Jan 08, 2014 10:31 am    Post subject: Reply with quote

Engulfing Lines : Note the pattern in this image, it has two candles. These are called Engulfing Lines. These are major reversal patterns with opposite color real bodies. In a down trend when real body of the Red candle is engulfed/covered with Green candle, it is called “Bullish Engulfing Pattern”. In an uptrend when real body of Green candle is engulfed/covered with Red candle, it is called “Bearish Engulfing Pattern”.





-> In Engulfing patterns, color of candles are important. They should be of opposite color. In an Uptrend, Engulfing Candle should be Red color and in a Downtrend, Engulfing Candle should be of Green color.

-> Trend should be very clear. For “Bullish Engulfing Pattern” clear visible downtrend should be there and for “Bearish Engulfing Pattern” clear visible uptrend should be there.

-> The second real body of candle should engulf/cover the entire real body of the previous candle (it need not engulf the shadows).

-> When the first candle has small real body candle (Spinning Top) and next candle’s real body is very large, it shows that power may be shifting and reversal may happen.

-> If Volumes are strong on the second candle it shows more strength and probability increases for a reversal.



Examples of Engulfing Lines


Last edited by hemant.icharts on Thu Jan 09, 2014 10:36 am; edited 1 time in total
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Post: #9   PostPosted: Thu Jan 09, 2014 10:19 am    Post subject: Reply with quote

Stars : Stars are the next series of reversal patterns. Stars have small real bodies that have gap from previous candles real body. It can even be within the shadow of previous candle, but real bodies should not overlap.

When a star forms in type of a Doji, they are called as “Doji Stars”.

Color of the real bodies of stars are not important, they may form in any color.

They should form after a visible trend and previous candle should have large real body.

There are 4 reversal patterns that have stars in them:

1) Morning Star.
2) Evening Star.
3) Doji Star.
4) Shooting Star.


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Post: #10   PostPosted: Fri Jan 10, 2014 12:58 pm    Post subject: Reply with quote

Morning Star : The pattern in the image is a bullish reversal pattern which occurs near the end of a bear trend. It is called “Morning Star”. Please note that, this is three candle pattern.

-> First candle formed is a bearish candle with large real body of red color.

-> Second candle is formed with small real body, which can be any color not overlapping with previous candles real body.

-> Third candle is long bullish candle which overlaps maximum part of first bearish candle.





Examples of Morning Star

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hemant.icharts
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Post: #11   PostPosted: Fri Jan 10, 2014 1:00 pm    Post subject: Reply with quote

Evening Star : The pattern in the image is a bearish reversal pattern which occurs near the end of a bull trend. It is called as “Evening Star”. Please note this is three candle pattern.

-> First candle formed is a bullish candle with large real body of green color

-> Second candle is formed with small real body, which can be any color not overlapping with previous candles real body.

-> Third candle is long bearish candle which overlaps maximum part of first bullish candle..





Examples of Evening Star

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