CANDLESTICK PATTERNS

GROUP - I NIKUNJ NAYAK SALIL NARAVEKAR W.UMESH NANDA VIPUL SHAH BRIJESH MOURYA

CANDLESTICK BASICS
JAPANESE RICE TRADERS CREATED THEM OVER 400 YEARS AGO STEVE NISON IS CREDITED WITH INTRODUCING THEM INTO THE U S MARKETS

GREGORY MORRIS AND STEPHEN BIGALOW ARE THE OTHER 2 MAJOR CANDLESTICK GURUS
THERE ARE OVER 100 CANDLESTICK PATTERNS CANDLESTICKS SHOW INVESTOR SENTIMENT MORE VISUAL THAN OHLC BARS

BEARISH CANDLE
SOMETIMES REFERRED TO AS A BLACK CANDLE

BULLISH CANDLE
SOMETIMES REFERRED TO AS A WHITE CANDLE

INDECISIVE CANDLES
DOJI AT THE TOP SHOULD NEVER BE IGNORED THE SMALLER THE BODY THE MORE INDECISION DOJI BODY IS VERY SMALL 10% OF DAILY RANGE

DRAGON-FLY

TOMBSTONE

LONG-LEGGED

INDECISIVE CANDLES (CONT)

SPINNING-TOP NO ONE WON THE BATTLE OF THE BULLS AND BEARS BODY IS LESS THAN 1/3RD OF THE CANDLE RANGE H L THE TAILS ARE LONGER THAN THE BODY

BULLISH CANDLESTICK PATTERNS

ENGULFING
MORNING STAR

HAMMER
THREE WHITE SOLDIERS

KICKING

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BULLISH ENGULFING DEFINITION

Bullish Reversal 63% of the time HOW TO IDENTIFY IT

CANDLE 1 IS A BEARISH CANDLE

CANDLE 2 COMPLETELY ENGULFS THE BODY OF THE CANDLE 1 DOWNTREND OR

STOCK IN A CONSOLIDATING

PATTERN SUGGESTS DOWNTREND HAS LOST MOMENTUM AND THE BULLS MAY BE GAINING STRENGTH ENGULFING PATTERN IS ALSO THE FIRST TWO CANDLES OF THE THREE OUTSIDE PATTERNS.

CONFIRMATION IS SUGGESTED

BULLISH ENGULFING- BAD ONE

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BULLISH ENGULFING- BAD TWO

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BULLISH ENGULFING GOOD ONE

BULLISH ENGULFING GOOD TWO

MORNING STAR
Bullish Reversal 78% of the time

How to Identify it

First candle is a long black candle

Second candle gaps down and trades within a small range and closes at or near its open. The third candle is a white candle Stock has in a downtrend or consolidating Pattern suggests the trading sentiment has changed and trend reversal is a high probability No confirmation is required or suggested

Note: The second candle can be a Doji or spinning top

MORNING STAR - GOOD

MORNING STAR - BAD

HAMMER
Bullish Reversal 60% of the time How to Identify it

Single candle pattern

Candle can be bullish or bearish Signal considered stronger if candle is bullish Candle body is less than 1/3 of the range H L

Stock is in a downtrend Long tail implies sharp sell-off after open but the bulls rallied and won the battle suggest more buying to come Requires confirmation

THREE WHITE SOLDIERS

Bullish Reversal 82% of the time How to Identify it Three white candles occur, each with a close above the previous candle each candle opens within the body of the previous candle

Each candle closes near or at its high stock is in a downtrend

Pattern suggests the market has been selling of for too long, and buyers are beginning to come back into it No confirmation is required or suggested

THREE WHITE SOLDIERS - GOOD

THREE WHITE SOLDIERS - BAD

BULLISH KICKER
Bullish Reversal 53% of the time How to Identify it The first candles open and the second candles open are the same. The price movement is in opposite directions from the opening price. The trend has no relevance in a Kicker situation. The signal is usually formed by surprise news before or after market hours. The price never retraces into the previous candle's trading range. No confirmation is required or suggested The first day is a Black Marubozu day The second day is a White Marubozu day that gaps upward

BULLISH KICKER - GOOD

BULLISH KICKER - BAD

BEARISH CANDLESTICK PATTERNS

ENGULFING
EVENING STAR

HANGING MAN
THREE BLACK CROWS

KICKING

COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

BEARISH ENGULFING
Bearish Reversal 79% of the time How to Identify it First candle is a white candle Second candle is Bearish and its body completely Engulfs the first candles candle body Stock has been in an uptrend Pattern suggests the bears have taken control and the trend is about to reverse. Confirmation is suggested

COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

BEARISH ENGULFING - BAD

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BEARISH ENGULFING - GOOD

EVENING STAR
Bearish Reversal 72% of the time How to Identify it First candle is a long white candle Second candle trades within a small range and closes at or near its open. The third candle is a black candle Stock is in an uptrend Pattern suggests the trading sentiment has changed and trend reversal is high probability No confirmation is required or suggested

Note: The second candle can be a Doji or spinning top

EVENING STAR

EVENING STAR

HANGING MAN
Bearish Reversal 59% of the time How to Identify it Single candle pattern Candle can be bullish or bearish

Signal considered stronger if candle bearish

Candle body is less than 1/3 of the range HL

Stock is in an uptrend Long tail implies sharp sell-off after open and suggest more selling to come Requires confirmation

THREE BLACK CROWS

Bearish Reversal 78% of the time How to Identify it Three black candles occur, each with a close below the previous candle Each candle opens within the body of the previous candle

Each candle closes near or at its lows

Stock is in an uptrend Pattern suggests the market has been at a high price for too long, and investors are beginning to compensate for it. No confirmation is required or suggested

THREE BLACK CROWS - BAD

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

THREE BLACK CROWS - GOOD

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BEARISH KICKER
Bearish Reversal 54% of the time How to Identify it The first candles open and the second candles open are the same. The price movement is in opposite directions from the opening price. The trend has no relevance in a Kicker situation. The signal is usually formed by surprise news before or after market hours. The price never retraces into the previous candle's trading range. No confirmation is required or suggested

BEARISH KICKER - BAD

Copyright 2007, TradingOurWay, Prepared by Kermit Prather

BEARISH KICKER -GOOD

COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

CANDLESTICKS STATISTICS WHERE TO FIND

CANDLESTICKS STATISTICS CONT.

CANDLESTICKS STATISTICS CONT.

CANDLESTICKS STATISTICS CONT.

HOW TO ENHANCE PROBABILITIES

VISUALLY OBSERVE THE CHART FOR PROPER TREND UP-TREND MOVING AVERAGES ALIGN TOP-DOWN 20, 40, 50 DOWNTREND FROM TOP-DOWN 50, 40 ,20 TRENDLINE LINEAR REGRESSION SLOPE PATTERN OCCURS AT OR NEAR A MAJOR MA

COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

USE EFFICIENCY RATING

VAN THARP USES AN EFFICIENCY RATING CREATED FROM PRICE CHANGE DURING 4 TIME PERIODS PICK ANY 4 PERIODS SUCH 20, 45, 90, & 180 TC2007 FORMULA USING DAILY RANGE
(((C C180) / (AVGH180 AVGL180)) + ((C C90) / (AVGH90 AVGL90)) + ((C C45) / (AVGH45 AVGL45)) + ((C C20) / (AVGH20 AVGL20))) / 4

RATING > + 7 ARE IN AN UPTREND WHILE < -7 IN A DOWNTREND THARP USES AN ATR BUT DAILY RANGE WORKS AS WELL STOCKFETCHER RESULTS
COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

HOW TO ENHANCE PROFITABILITY

USE OVERBOUGHT / OVERSOLD INDICATORS
STOCHASTICS 12.3.3 OR 14.5.5 CROSSOVER WILDERS RSI 5 OR 14

RELATIVE STRENGTH COMPARISON TO ITS INDEX USE STOCKS THAT HAVE MADE AN EXTENDED MOVE
COPYRIGHT 2007, TRADINGOURWAY, PREPARED BY KERMIT PRATHER

CANDLESTICK WEB SITES

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WWW.THEPATTERNSITE.COM - TOM BULKOWSKI

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