Technical Analysis Guide

A complete breakdown of how to read technical analysis — from candlestick charts and market structure to
trend identification, support/resistance, engulfing patterns, and head & shoulders reversals.

1. Candlestick Charts
Candlestick charts are the standard for trading. Each candle represents a time period (1 min, 15 min, 1
hour, 4 hour, daily, weekly, etc.) and shows the open, close, high, and low of price during that period.

Anatomy of a Candlestick

High High

Upper Wick

Close Open

Body

Open Close

Lower Wick

Low Low

Bullish Bearish

Bullish (green): Close is above the Open — buyers dominated.

Bearish (red): Close is below the Open — sellers dominated.
Wicks show the high and low extremes during the period.
Body represents the range between Open and Close.

Time Frame Nesting

Every higher-timeframe candle is made up of smaller lower-timeframe candles:

1 Daily Candle = 6 × 4-Hour Candles = 24 × 1-Hour Candles = 48 × 30-Min Candles

Changing time frames is like zooming in or out — you see the same price action at different levels of detail.
2. Line Chart — The Training Wheels
The line chart connects closing prices in a simple line. It strips away noise and makes trend direction
obvious.

↑ Bullish Trend (Steps Up) ↓ Bearish Trend (Steps Down)

Use the line chart to get the feel of the market direction. Then switch to candlesticks for execution.

3. Trending Markets
The key to trading: trade with the trend. The trend is your friend.

Bullish Trend — Higher Highs & Higher Lows

HH

HH

HH HL

HH
HL

HL

BULLISH TREND — Higher Highs (HH) & Higher Lows (HL)

Bearish Trend — Lower Lows & Lower Highs

LH

LH
LL

LL LH

LL

LL
BEARISH TREND — Lower Lows (LL) & Lower Highs (LH)

Key Rules
Trend Required Structure Break of Structure (BOS)

Bullish Higher Highs + Higher Lows Body close below the Higher Low → now Bearish

Bearish Lower Lows + Lower Highs Body close above the Lower High → now Bullish

It is impossible to have a Higher High without a Higher Low.

It is impossible to have a Lower Low without a Lower High.
Price can do anything between the HH and HL (or LH and LL) — the trend remains intact until a break
of structure.
Always start analysis from the most recent price and work backwards.

4. Market Structure — The Elbows

Market structure is made up of swing points — sharp turning points in price that look like elbows. Every
peak and trough is a structure point.
 Elbow

Elbow

Elbow
Elbow

Elbow
Elbow

Elbow

Elbow

MARKET STRUCTURE — Every sharp turning point is an "Elbow"

Swing Highs (peaks) and Swing Lows (troughs) form the skeleton of market structure.
Without these elbows, the market would be a smooth wave — untradeable.
Market structure is what creates trends, support, resistance, and patterns.

5. Support & Resistance

Support and resistance are horizontal levels where price has historically reacted. They are formed at
market structure points (elbows).

Resista

Resistance → Support

Suppor

Price bounces off Support (↑) and gets rejected at Resistance (↓)
A broken Resistance becomes Support — a broken Support becomes Resistance

SUPPORT & RESISTANCE

Key Principles
Support = a level that holds price up (floor). Buy at support.
Resistance = a level that pushes price down (ceiling). Sell at resistance.
The same level can act as support AND resistance at different times (role reversal / flip).
S&R is respected roughly 60–75% of the time — never rely on it alone.
 Same concept as: supply/demand zones, order blocks — all the same thing.
Do not take a trade unless price is AT a support or resistance level.

6. Engulfing Candlestick Pattern — The Entry Signal

The engulfing candle is the primary entry confirmation. It shows momentum — one candle completely
“eats” one or more previous candles.

Bullish Engulfing

BUY Signal
Bullish engulfing = buyers
Engulfs 3 dominating the market
candles

BULLISH ENGULFING PATTERN

Bearish Engulfing

Engulfs 3 SELL Signal

candles Bearish engulfing = sellers
dominating the market

BEARISH ENGULFING PATTERN

Engulfing Rules
The candle must completely cover (engulf) at least 1 previous candle body.
The more candles it engulfs, the stronger the signal.
 Think of it like a race: the car that overtakes everyone is the one you bet on.
Without an engulfing candle, do not enter the trade — patience pays.
Works on any time frame.

7. Head & Shoulders — The Reversal Pattern

The most powerful reversal pattern. Once you see it, you can’t unsee it.

Head & Shoulders (Bearish Reversal — Top of Trend)

Head

Shoulder
Shoulder Right
Left

Neckline

BOS ↓

HEAD & SHOULDERS — Bearish Reversal (at market top)

Inverted Head & Shoulders (Bullish Reversal — Bottom of Trend)

BOS ↑

Neckline

Left
Shoulder Right
Shoulder

Head

INVERTED HEAD & SHOULDERS — Bullish Reversal (at market bottom)

Head & Shoulders Rules
H&S at top → bearish reversal (Left Shoulder, Head, Right Shoulder, break neckline down)
Inverted H&S at bottom → bullish reversal (same shape flipped, break neckline up)
Pattern is only confirmed when price breaks through the neckline with a body close.
Until the neckline breaks, it is NOT a valid pattern — price can still reverse.
Shoulders don’t need to be symmetric — “ugly” H&S patterns are valid too.
8. Break of Structure (BOS) — Trend Shift
 Price in Bullish Trend
(HH + HL)

Does price body-close

BELOW the Higher Low?

No Yes

Trend remains Bullish ⚠️ Break of Structure!

→ Look for Buys Trend shifts to Bearish

Last swing high = Lower

High
New low = Lower Low

Does price body-close

ABOVE the Lower High?

Yes
No

Trend remains Bearish ⚠️ Break of Structure!

 → Look for Sells Trend shifts to Bullish

9. Complete Trading Checklist

1. Identify Trend 2. Find S&R Level 3. Wait for Price 4. Confirm with 5. Execute Trade
(HH/HL or LL/LH) (Elbows / Structure) at S&R Level Engulfing Candle with the Trend

Step Description

Start at the most recent price. Work backwards. Identify HH/HL (bullish) or
1. Trend
LL/LH (bearish).

Mark the elbows / structure points. These form your support and resistance
2. S&R Levels
zones.

3. Wait for Price Only trade when price reaches a support (for buys) or resistance (for sells).

4. Engulfing Wait for a bullish or bearish engulfing candle as entry confirmation. No engulfing
Candle = no trade.

5. Execute Enter the trade in the direction of the trend. The trend is your friend.

10. Key Takeaways

Patterns repeat — look to the left to know what the right will do.
Always start from live price and work backwards — don’t get lost in old data.
Trend is your friend — buy in bullish trends, sell in bearish trends.
Support & Resistance = the same as supply/demand, order blocks — all the same concept.
Engulfing candle = your go/no-go signal. No engulfing, no trade.
Head & Shoulders = the strongest reversal pattern. Only valid after neckline breaks.
Everything applies identically on all time frames — 1 min to monthly.
Buys and sells are the same pattern — just flipped. Master one, you master both.